Wisconsin recently offered up to $3 billion in tax incentives to FoxConn of Taiwan. In Detroit, there have been hundreds of millions of dollars in incentives for a new arena for the Red Wings and Pistons and for developments by businessman Dan Gilbert, as well as huge tax credits for auto manufacturers.
Now, states and cities are trying to put together incentives to get Amazon’s new massive Headquarters 2. But the question remains: will citizens actually benefit from their tax dollars being spent to attract or retain business?
In a nation of 50 state economies, the need for states to lure companies with enviable incentives is part of a “fundamental reality,” according to Ken Sikkema, a senior policy fellow with Public Sector Consultants and the former Republican majority leader in the state Senate.
“They all have these packages. They all want these really big enterprises, whether it’s Amazon, Foxconn, or Switch in Grand Rapids," Sikeema said.
That reality has “created this kind of Frankenstein’s monster of an incentive package that is now almost required by governments in order to lure these businesses into your state,” added Vicki Barnett, former Mayor of Farmington Hills and a former Democratic legislator.
The original tax abatement law was designed to incentivize movement by businesses into communities with infrastructure already built, Barnett says. These communities would typically be neighborhoods needing clean-up and with high unemployment. Now, though, tax incentives are often used by companies to build in so-called “green fields” in the exurbs of cities.
And still, incentives are not always enough.
“Every time Michigan or some other state comes up with an attractive package, some other state comes up with a more attractive package,” said Sikkema. Plus, large companies can often push out smaller local companies that work in the same market.
Both Barnett and Sikkema agree that if a company accepts the incentives and moves to Michigan, they need to give back to the community. “If you’re going to offer up community tax dollars to lure business, what should that business bring back to the community in exchange for those dollars, aside from jobs?”
Listen above for the full conversation.