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There’s no way around honoring auto industry tax credits, and there shouldn’t be

Mar 12, 2015

Credit Matthileo / Flickr - http://j.mp/1SPGCl0

When Governor Rick Snyder was answering your questions earlier this week here on Michigan Radio, he waded into the issue of more than $9 billion in outstanding tax credits owed to businesses that stayed in Michigan and re-invested in their operations here. And that has tipped Michigan's budget into a deficit.

The program began in the Engler Administration but was widely used in the latter part of the Granholm Administration. Critics call it "corporate welfare," but Snyder disagreed with this terminology, saying the companies benefiting from this program helped create jobs.

Detroit News business columnist Daniel Howes recently evaluated the politics of honoring the tax credits for companies that invested in Michigan.

Howes says the auto industry invested billions of dollars to create and expand their workforce and locations in Michigan. "Now the state has got to give them the credits that they are obliged to give them."

The tax credits, along with the bailout, helped the auto industry to remain in the state. Howes shared an email he received from an auto executive that corroborated his claims. The executive said the credits helped the company keep a small car project in Michigan plants that would have otherwise gone overseas.

"You have a greater concentration of the U.S. auto industry in Michigan than you've had in a very long time," Howes says.

But he worries that legislators, especially newer ones, don't understand how much the credits have helped Michigan, and how important it is for the state to honor their promises.

If they don't follow through, Howes believes this will make the state less attractive to those looking to invest in it. "What this says about Michigan," says Howes, "is that you cut a deal with Michigan and if there's a political backlash or the price becomes too large because things change, they're going to want to back out."