Next up: Building Michigan’s next business tax cut

The governor and lawmakers are done giving a few corporations buckets of cash to come to Michigan.

Millions to Gotion, a Chinese-owned company?

The public backlash is a little too toasty right now, so Lansing’s leaders will let the corporate handouts/giveaways/incentives/etc. sit on the backburner (for now).

Instead, Gov. Gretchen Whitmer, Speaker Matt Hall and Senate Democrats are working on a new tax cut. 

This revisited old idea allows companies to pocket at least half of the income tax their new employees would otherwise pay the state.

This Frankenstein has had plenty of names. Years ago, they called it “Good Jobs.” Gov. Gretchen Whitmer has previously called it the Michigan Employment Opportunity Program. To the House Speaker, it’s called the “Real Jobs Tax Credit” program. The state Senate called it “More Jobs For Michigan.”

It’s all the same concept. 

You hire Suzy Jones at, let’s say, $100,000 a year. Michigan’s income tax rate is a flat 4.25 percent. Suzy is obligated to pay $4,250. Under this plan, Suzy pays $2,125 to Whitmer’s Department of Treasury and you, the employer, pockets the other $2,125.

Compared to the $215 million going to Our Next Energy or the $120 million going to LG Energy Solution in Delta Township, this new business tax break seems to be small change.

House Republicans want to create a $50 million pot that companies of all sizes dip into. Once the money is gone, it’s gone. Maybe they’ll set aside more, but they’ll cross that bridge when they come to it.

The Governor’s office would prefer the fund be limited to specific growing industries – technology, advanced batteries, stuff like that. 

Senate Democrats would prefer applying the program to only the high-paying jobs, as well. 

They also want the companies that dip into the pot to kick a little bit of their savings into the community. Maybe that means buying equipment from a local contractor. Maybe that’s helping with the costs of a workforce development program or a childcare center.

Hammering out the compromise is the last main item on the agenda for the state legislature and the governor for calendar year 2025.

This push for a new economic development comes as the last shovels of dirt are thrown on “the Strategic Outreach and Attraction Reserve Fund” or the “SOAR Fund.”

SOAR was Gov. Gretchen Whitmer’s post-COVID shot in the arm to draw big-dollar, transformative investments to Michigan. 

Whitmer took the mentality that if she could land some really big fish by waving some really big bait in front of their faces, more economic development would follow.

Instead, SOAR became too controversial. The deep wings of the Republican and Democratic parties locked hands. They slowly convinced colleagues that big grants – like the combined $715 million offered to Gotion – weren’t worth the squeeze.

Too often, these projects don’t come to fruition or materialize at the scale initially promised.

Gotion was showered in controversy. Its China-based parent corporation had to write a pledge of allegiance to the Chinese Communist Party (CCP) in its corporate bylaws to operate.

That didn’t sit well with the rural folks in Mecosta County. They were convinced by a pair of former ambassadors that the CCP was going to use Gotion as a beachhead to spy on the United States. The Grayling Army Airfield isn’t that far away, you know.

The experience poisoned the well for SOAR.

Even the non-extreme political leaders were asking the question, “Is it fair to give all this money to one company, when everybody could use a lift?”

It looks like the answer is no.

That’s why this latest business tax cut is the hot stove item for the Michigan legislature in 2025.

That’s why every Republican gubernatorial candidate is not only openly campaigning against SOAR, but on dramatically reforming – if not eliminating – the Michigan Economic Development Corporation (MEDC), which oversaw SOAR.

It’ll be bipartisanship’s next big test.

(Kyle Melinn is the editor of the Capitol news service MIRS. You can email him at melinnky@gmail.com.)