Contingent upon the passage of Senate Bill 408, recently graduated students looking for employment will receive a state-sponsored incentive to work in Michigan.
The bill, which was voted out of committee and sent to the full state Senate last Wednesday, would give graduates of private and public Michigan schools a tax credit equal to 50 percent of the annual payment on their student loans for each tax year they live and work in Michigan.
In a statement, state Sen. Glenn Anderson (D–Westland), the bill’s sponsor, characterized it as one part of a bigger overall approach to address rising tuition costs and the growing need for a more educated workforce.
“My legislation addresses two significant problems in Michigan — the growing student loan debt crisis for college graduates and the economic brain drain we experience when our students move to other states after graduation,” he wrote in the statement. “The credit would be a financial incentive for graduates to stay in Michigan.”
In a written statement, State Rep. Jeff Irwin (D–Ann Arbor) agreed that the bill could have a positive effect, but suggested that more could be done to keep graduates in Michigan, such as improving the public school system.
The tax reduction per person would be capped at 20 percent of the average annual tuition for Michigan schools, and graduates would be eligible to receive the reduction for up to five years. The bill defines an eligible graduate as someone who has completed at least a bachelor’s degree at any of Michigan’s private or public colleges and universities.
An analysis performed by the Senate Fiscal Agency estimates that the bill would reduce state revenue by $29.4 million for the 2013-2014 fiscal year, and has projected that it could cost the state up to $152.9 million by the 2017-2018 fiscal year.
While those numbers are large, they don’t necessarily represent a net loss for the state. Don Grimes, a senior research associate at the University’s Institute for Research on Labor, Employment and the Economy, pointed out that the demographic this bill is aimed at — newly graduated students with at least a bachelor’s degree — have both a high-earning potential and are very likely to leave the state without incentives like this.
“If you can keep (recently graduated students) here for five years, the probability that they will stay in the state after that increases dramatically, and the state will keep all of their additional income tax payments, which would have been lost if they had moved out of the state,” he said.
Grimes added that “people who earn bachelor’s degrees tend to be big net contributors to the state and local government budgets, and they pay much more in taxes than they cost the state and local government in extra services.”
LSA junior Lisa Tencer, president of the University chapter of Pure Michigan Talent Connect, a group that encourages students to stay and work in the state after graduation, said from a student standpoint, the bill definitely makes Michigan a more enticing post-graduation option.
“According to USA Today, 44 percent of the U-M class of 2011 were in debt when graduating,” said Tencer. “This is a growing concern to many of my peers who would indeed find this tax credit extremely attractive. Many cities such as New York City and Chicago seem more attractive to graduates because of the higher rate of pay and larger population.”
A similar bill, HB 4182 — which included recommendations and research from the University chapter of the College Democrats and the Roosevelt Institute — was introduced to the State House in February 2013 by state Rep. Andy Schor (D–Lansing). It has been in committee since April.