Michigan has been a big spender on long-term economic development subsidies, which often have benefited large and well-established companies including Ford, General Motors, and Fiat Chrysler. Before being dissolved in 2012, the Michigan Economic Growth Authority (MEGA) approved billions of dollars in tax credits for corporations that the public will continue paying well into the 2030s.
In late 2021, a $1 billion Strategic Outreach and Attraction Reserve Fund was created to develop large sites. Top state officials, including the governor, used a non-disclosure agreement while crafting the subsidy to hide the details from the public until the deal was largely finalized. Another state program, Brownfield Tax Increment Financing, rebates state and local property taxes to developers.
On a local level, Detroit has been approving property tax breaks and other subsidies, hoping large projects will revitalize the city.
Many subsidy awards are approved by the Michigan Strategic Fund (MSF) board and are administered by the Michigan Economic Development Corporation (MEDC), a private-public agency that also markets the state.
Most of the major subsidies are well disclosed in the MSF-MEDC annual reports, including outcomes and clawbacks. Those reports, however, can be hard to find (FYI: search for MEDC-MSF annual reports under Legislative Reports on the MEDC reports and data webpage). In 2021, in a significant blow to transparency, the governor removed a requirement that the reports list amendments to the Michigan Business Development Program agreements.
The state Tax Expenditure Reports includes the costs of tax-based subsidies. Grant costs can be found in the MSF-MEDC annual reports.
Major subsidies are structured as grants or refunds and thus only some programs are reported under GASB 77, MEGA tax credits among them. The state reimburses school districts for the lost revenue but about 70% of school districts still reported forgone revenue of $66 million in 2020, even after the reimbursements.
- See who is responsible for the implementation of GASB 77 on our Michigan State Road Map.
Michigan contracts with a private or a university institution to evaluate its major subsidies every four to six years. Separately, the Mackinac Center for Public Policy, a free market think tank, has been doing rigorous evaluations and analysis of the state subsidies as well, showing the ineffectiveness of those programs. One study found that the state subsidies cost taxpayers on average $600,000 per job.