A pair of bills creating new tax incentives for businesses employing Michigan residents is moving to the Michigan House of Representatives after the state Senate passed it by a 32-5 vote Wednesday.
Under the bills, nicknamed the “Good Jobs for Michigan” program, businesses with at least 250 new employees making at least 125 percent of the annual average wage for their region would be able to keep up to 100 percent of the income taxes taken out of their employees’ paychecks for 10 years. Businesses with at least 500 new employees making at least 100 percent of the average wage would receive up to a 50 percent abatement lasting five years. The state is divided into 10 prosperity regions, for which the average wage is calculated independently, but the average salary for the state as a whole is about $45,000.
Specifically, the bills authorize the payment of withholding tax capture revenues from the state to businesses. Withholding tax capture revenues are the income taxes paid by businesses to the government on behalf of the businesses' employees by taking a portion out of employees' paychecks. If the business overestimates the amount of this income tax, employees are refunded every year when they file their taxes. Under the bills, the money withheld from employees’ checks would stay with the businesses rather than going to the state.
The program is capped at a maximum value of $250 million, representing at most 15 agreements with a company per year.
The five opposing votes in the Senate were all from Republicans. In an interview with the Detroit Free Press, one of them, Sen. Patrick Colbeck (R–Canton), argued the bills would benefit too few people.
“This is a case that we need to be pursuing broad-based tax incentives that benefit everybody, not these targeted benefits that benefit 15-some odd companies,” Colbeck said. “I’m tired of the business being prioritized over the best interests of everybody.”
In a statement last week, Gov. Rick Snyder was tentatively supportive of the bills.
“Both packages are addressing areas that need to be addressed,” he said. “There still may be some issues that can be improved, but I won't want to get into too many specifics. And I think there's a need for a tool in the tool box for potentially large manufacturers, particularly where they pay above average wages.”
State Rep. Yousef Rabhi (D–Ann Arbor) strongly opposed the bill, states businesses in the state have already been given enough.
“The net amount that the state is taking in from businesses is miniscule compared to what people are paying in income tax and sales tax and all that,” he said. “We've given them a repeal of the Michigan Business Tax, a reform of the personal property tax, and we've given, given, given to businesses and I feel like the whole argument behind this is ridiculous. If businesses can't create jobs after we've given them all this other stuff, then I don't know what else it's going to be.”
Calling the bill “corporate welfare,” Rabhi argued the money the state would lose from the bill could be more effectively spent by the state itself.
“We have to be able to pay our bills as a state,” he said. “That's $250 million that could've gone to schools, that could've gone to police and fire, that could've gone to creating jobs in infrastructure. We can create jobs with that money if we actually invest it in our public infrastructure, which, that's where the money's going to be coming out of.”
Rowan Conybeare, chair of College Democrats, Public Policy junior said she supports the bill if it follows through.
“If the bill delivers on its promise of creating well-paying jobs, then it should be an effective bipartisan effort,” Conybeare said.
President of College Republicans Enrique Zalamea, an LSA junior, did not respond to requests for comment.