Here’s an example. In 2015 I was a newly elected State Representative. I had never held political office before so I was looking at things with a fresh set of eyes. Shortly after taking office, we began constructing our state budget for the upcoming fiscal year. What I found surprised me. In our projection, we were expecting to collect about $850 million in corporate business taxes. On the other side of the ledger sheet, we were expecting to pay out about $850 million in business tax credits. At that point, why do we even have a business tax? It certainly isn’t efficient to take money from all the various businesses that pay into the system, run it through the Department of Treasury, over to the Department of Labor and Economic Opportunity, then to the Michigan Economic Development Corporation, into the Michigan Strategic Fund, and finally paid out to the select few privileged corporations that have enough muscle and legal compliance attorneys to qualify for and obtain the credits. Aside from that, how is it morally fair to collect taxes from the thousands of businesses paying into the state treasury, only to pay that same money out to larger businesses or even others that may be in fact a direct competitor to an existing business in our state? But we can’t just stand by and do nothing, they say. Other states will step in, they’ll poach our talent, they’ll take our companies, so we have to engage in this arms race between states now. I think it’s fair to ask if there is in fact a better way to spend the resources we have than what is on the table before us.
Consider this. Site Selection magazine calls itself the leading publication in corporate real estate, facility planning, location analysis, and foreign direct investment. They consider themselves a leader in innovative economic development news coverage. Site Selection magazine conducts a survey each year to determine what these corporate executives look at to make their decision where to locate and where to expand and invest. I think we should look at what they told us. In October 2020, they ranked the following in order for site selection criteria. Existing workforce skills was No. 1 and workforce development was No. 2. Transportation and infrastructure was third, regulatory environment, state and local tax structure, right-to-work status, utility costs and reliability, quality of life, and No. 9 on the list out of ten was incentives. The top items on this list are all topics we can affect through legislation and policy, yet incentives, which are much lower on the list, receive all of the attention. Incentives are really only necessary to make up deficiencies on items higher on that list of priorities.
I mentioned earlier the hundreds of millions paid out in incentive credits that were locked in our state budget, but incentives rank very low on the list of consideration. Imagine instead how much difference in the quality of infrastructure an additional $850 million per year would make? How many potholes could we fix on our darn roads? In 2013 one estimate was that it would cost about $10 per pothole to repair, but 2013 was a long time ago. Let’s assume the cost of labor, material, brand, inflation, etc., that it has doubled since 2013 and cost $20 per pothole. That alone could still fix more than 40 million potholes every single year. If you believe that repairing 40 million potholes is a bit outrageous, consider how many miles we could pave of a two-lane highway. According to figures drawn from a 2019 Senate Fiscal Agency analysis, $850 million could pave a two-lane highway from this State Capitol Building all the way to the Mackinac Bridge, fully funded in cash with no debt and we would still have money left over. Again, that’s money that is every single year without raising anyone’s taxes.
Would we not be wiser to invest in the needs we knew from empirical evidence that are higher on the list of priorities for companies looking for site locations, and also at the same time benefit all of our residents? Would major corporations rather have reliable transportation with smooth roads to get their goods to market or would they rather have cash in their pocket as a settlement to make up for the potholes outside their facility?
Some of you have heard me talk about my Charlotte Wal-Mart test. I talk about it frequently in my office with my staff — they usually roll their eyes—and other times too. To summarize it bluntly, I just pose the question that if we were to gather together a handful of people shopping at the Wal-Mart in Charlotte together, what would they think of this idea? In other words, does it pass the Charlotte Wal-Mart test? Just yesterday my wife contacted me on my way home from work to pick up some essentials we needed at home and I stopped at the Wal-Mart in Charlotte. While waiting to check out, a couple in line next to me struck up a conversation about politics going on today. I mentioned this package of bills coming before us to gauge their reaction. The husband asked me, What about my friend who owns a bunch of sandwich shops? Will he qualify for this incentive program? Of course not. But his friend can’t find workers to operate fully staffed. His friend was shut down off and on throughout the pandemic and has struggled to get by, but nothing in this bill will benefit the sandwich shop owners in each of our districts or any of the other small businesses out there just looking for a fair shot at living their dreams. He’s not trying to be the next Subway and have restaurants all over the world; he’s just trying to chase his dream and provide a livelihood for his family along the way.
I think everyone here is familiar with the story of The Giving Tree by Shel Silverstein. The Giving Tree strikes up a friendship with a boy and continues to give more and more to the boy at every turn. By the end of the book, the tree is nothing more than a stump. I don’t want that to happen to the resources we have here in Michigan. Unlike the Giving Tree, those fruits are our fruits, paid for by our taxpayers; those branches are our branches paid for by our taxpayers—hardworking people just trying to live their lives.
Mr. President, maybe I’m nostalgic for a simpler time, one where we competed against other countries, not against our fellow countrymen in other states. And maybe I’m wrong. Maybe these will be different, and maybe this will be something that truly operates as has been presented by those advocating for its passage. But because of the concerns I raised, I cannot place my vote and the voice of 275,000 constituents to this legislation today. I truly wish those who are looking to invest in our state the warmest of welcomes and my hope is that we can work toward a future of opportunity that applies equally for every employer in Michigan—the large, the medium, and the small.
The following bill was read a third time:
Senate Bill No. 764, entitled
A bill to amend 1967 PA 281, entitled “Income tax act of 1967,” by amending section 30 (MCL 206.30), as amended by 2020 PA 65.
The question being on the passage of the bill,
The bill was passed, a majority of the members serving voting therefor, as follows: