Michigan lawmakers weigh $100M tax subsidy plan to create high-paying jobs

• Michigan legislators weigh a new economic development strategy that would allow expanding businesses to retain payroll taxes from new employees
• The proposal is similar to the Good Jobs for Michigan program, which expired in 2019 
• This version has a new twist: Pay requirements that would be higher than nearby median wages

Michigan lawmakers are debating a proposal to grow desperately needed higher-wage jobs by allowing some businesses to keep taxes of newly hired workers rather than sending the money to Lansing. 

The bills — initiated in October during a wave of business incentive-reform legislation — would expand economic development tools in the state by adding a $100 million annual payroll tax capture option.

The High-wage Incentive for Regional Employment (HIRE) bill package would align Michigan with most other states, sponsoring legislators and business leaders told the state House Economic Development and Small Business Committee during a hearing on Tuesday. 

Businesses with as few as 25 employees could qualify, representing the professional service industries and others  — like agriculture, technology, energy, and tourism business expansions — that now don’t easily qualify for Michigan subsidies.

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• Bipartisan vibes as Michigan lawmakers seek to reform SOAR incentive fund

“We are taking a much more comprehensive approach to economic development than we have in years past,” state Sen. Sam Singh, D-Lansing, said during the hearing on House Bills 5313-15. Singh is a sponsor of corresponding Senate Bills 579, 580 and 581. 

Businesses that qualify would have to create jobs that pay better than an area’s median wage, said Rep. Jasper Martus, D-Flushing, a House sponsor of the bills.

It’s uncertain when the legislation could get a vote, but growing wages is an increasing concern in Michigan.

The state’s personal income per capita is 39th in the nation at $57,038. A recent report,  “A New Path to Prosperity?” warned wages could fall more without bold action.

In the report, mentioned during Tuesday’s hearing, authors Lou Glazer, president of Ann Arbor-based think tank Michigan Future Inc., and Donald Grimes, an economist at the University of Michigan, say the state must prioritize high-wage, knowledge-based jobs that require at least a bachelor degree.

A similar message has come in recent years from Business Leaders for Michigan, an advocacy group pushing for the state to improve education and the business climate to increase prosperity.

“Our incomes have not kept pace,” Lindsay Case Palsrok, vice president of government affairs for Business Leaders for Michigan, said during the hearing as she spoke in favor of the HIRE bills.

The bills would function like an updated version of the former Good Jobs For Michigan program initiated in 2017 under Gov. Rick Snyder. 

That program, which expired in 2019, limited the state to 15 agreements per year, with a cap of $200 million over the program’s life.

Under the new proposals, up to $100 million annually could be allocated over eight years toward the tax capture, with no limit on participants.

However, qualifying companies would have to propose creating at least 250 jobs with pay at 125% of an area’s median annual wage, or at least 25 new jobs at 150% of the area’s median wage. 

Under the plan, qualifying jobs could range from $47,153 in northeast Lower Peninsula, the area with the lowest median wage, to $72,571 in metro Detroit, the area with the highest.

Brian Calley, CEO of the Small Business Association of Michigan, told Bridge Michigan on Tuesday that the 25-hire threshold is appealing, as is the breadth of business types that could participate.

“They've taken some major steps toward making the incentives much more accessible to many, many more businesses,” said Calley, who served as lieutenant governor in the Snyder administration when it initiated Good Jobs for Michigan.

But House Minority Leader Matt Hall, R-Richland Township, slammed the proposal as a "stunt" that won't grow Michigan's economy.

"The governor wants to suppress the harmful economic symptoms by giving handouts to a few corporations, but instead, Michigan should craft a bold, coordinated economic growth strategy that heals the underlying economic sickness," Hall said in a statement.

Rep. Greg VanWoerkom, R-Norton Shores, raised questions about the complexity and administration of the program during Tuesday’s hearing.

“Writing in median (income requirement) and job creation numbers is important because it gives a goal and a clear sense of how this is going to actually operate,” said Rep. Graham Filler,  R-Duplain Township,  a co-sponsor. “So I'm OK with some of the complexities.”

Quentin Messer Jr., CEO of the MEDC, said 17 projects in the state’s economic development pipeline could take advantage of the tax capture if the bills pass.

Those projects spend $1.8 billion and hire 6,100 people, Messer said.