Testimony of John C. Mozena, President, Center for Economic Accountability
Before the Michigan House of Representatives Commerce and Tourism Committee
Regarding HBs 5425 & 5426
January 25, 2022
Madam Chair, honorable members of this committee, thank you. My name is John Mozena and I am the president of The Center for Economic Accountability. The CEA is an independent and nonpartisan 501(c)(3) nonprofit that’s based here in Michigan and works across the country to advance transparency, accountability and reform of state and local economic development programs.
I speak and write around the country on this topic, but before I was involved in public policy, I spent the better part of two decades in the private sector in professional roles that placed me behind the scenes of subsidized economic development deals here in Michigan and around the country. My testimony today is informed as much or more by those real-world experiences as it is by “ivory tower” research studies.
I’m here today in opposition to House Bills 5425 and 5426, because the Michigan Employment Opportunity Program is a costly mistake. Quite simply, Michigan is already addicted like few other states to big-business corporate welfare, and the subsidies created by these bills are the equivalent of giving our addiction another fix.
The simple, undeniable truth is that Michigan is not falling behind other, faster-growing states because of a lack of economic development subsidies. Despite the lobbyists’ talking points, when you look at the official numbers out of the CAFRs, Michigan has been one of the top three or four states for tax dollars abated for economic development deals every year since 2017 when they started counting.
We’re a top three or four state for tax breaks every year. Shouldn’t that be enough? Of course, as with the tragedy of real addictions, too much is never enough. Despite the SOAR subsidies signed into law barely a month ago, this committee is here today considering even more subsidies to feed the never-ending hunger of the big-business lobbyists and their cheerleaders. That should be a sign that something is badly wrong here.
Isn’t it enough for Michigan to every year be one of the top three or four states in taxpayer dollars lost to corporate tax breaks? Isn’t it enough that we’ve had years where the state treasury handed out more in tax abatements than it collected in corporate income taxes? How much will be enough? Do we have to be top two in subsidies? Number one? For how long, forever?
Never mind that when you look at what happened more recently under the Good Jobs for Michigan program, it turns out that the real-world difference in job creation between subsidized and unsubsidized companies was so tiny that Michigan’s taxpayers ended up spending hundreds of thousands of dollars a year to create each actual new job. If the state’s truth-in-advertising laws applied to the MEDC, they’d have had to rename the program “Obscenely Expensive Jobs for Michigan.” This legislature was right to let that disaster sunset, and wrong to consider bringing it back under an updated name.
Never mind that according to the Michigan Strategic Fund’s annual report to this legislature, Michigan’s big businesses are still sitting on more than four billion dollars in tax breaks from the old MEGA program, despite no new deals having been awarded under that program in twenty years. The General Fund is going to take four billion dollars’ worth of hits over the next nine years, and we’re being asked to believe that “Hey, you’ll still have tax breaks to burn in two decades” was supposed to have meaningfully changed an automaker’s decisions in 2008, in the face of potential bankruptcy and the depths of the Great Recession?
We see that today with General Motors. They’re getting $824 million for their local battery plant. That sounds like a lot of money; that sounds like the amount of money that’s going to change a company’s decision. But back in 2019, before COVID, GM posted $137 billion in revenues. $824 million is about what GM made every two days in revenues that year. If their leaders are changing their decision on where to build a factory based on two days of revenues, rather than what the best place is to put the factory, they should probably be fired by their shareholders.
The reality is, of course, that subsidies very rarely change companies’ minds about what to build and where. And we know this because, at least when they’re not filling out MEDC paperwork, they say so. In the 35th annual corporate survey done by Area Development Magazine, which is the site selection industry’s premier trade journal, companies ranked “state and local incentives” ninth in importance on site selection factors. Incentives barely beat out “shipping costs” in terms of relative importance in site selection.
Ninth. That’s where you stash your worst hitter in a baseball lineup, not where you bet your state’s future. There’s a lot this committee and this legislature could be doing to make Michigan more competitive, but you’re not going to be able to by focusing on the ninth-most-important thing on companies’ lists because the lobbyists keep pestering you for another subsidy fix to boost their bottom lines.
Madam Chair, members of this committee, you’re being asked a simple question with your vote on this legislation, and it’s a question to which your constituents deserve a straight answer: How much corporate welfare is enough? How much will ever be enough?
Respectfully, I put it to you that enough is enough.
Thank you, and I welcome any questions you may have.