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Industry Insider

By Mike Johnston
VP of Government Affairs
Michigan Manufacturers Association
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The election is over. Now the real work begins. Michigan is ready for change, and for leadership that can put us firmly on the path to recovery and, ultimately, a return to prosperity. We’re ready for a fresh start, and we’ll get one in 2011.

We have a new governor who must work closely with a legislature comprised of a significant number of members who will be entering their respective chambers for the very first time. There is much work to be done, because they will be inheriting a $1.6 billion budget deficit. Their challenge will be to tackle this problem head-on through true structural reform.

The work of moving Michigan forward will take a serious commitment from political leaders to rethink and restructure every level of state and local government. It will also require a continued and concentrated effort to develop an economic development plan to make Michigan more competitive with other states and countries — a plan which includes economic incentives to effectively retain our existing industrial base and attract more jobs and investment to our state.

The importance and effectiveness of these incentives has been the subject of a great deal of debate in Lansing, especially in the last few years. While some argue that Michigan can’t afford them, the truth is that we can’t afford to disarm in the national and global battle for industrial assets unless other states and countries disarm as well. Unfortunately, the reality is not simple. It would be economic suicide to reduce or eliminate the economic incentives we offer when efforts to lure our valuable industrial base away are increasing — and they are, at an alarming rate. The bottom line is that economic development incentives work; they generate huge capital investments, bringing in far more than they cost. The cost of not offering incentives would be enormous in terms of the loss of a substantial portion of our existing industrial economy. This would be particularly devastating in Michigan, since manufacturing remains twice as large as any other sector in Michigan.

There are numerous examples of the power of incentives to leverage new investment and jobs. Most recently, the Michigan Economic Growth Authority approved tax incentives for Chrysler, Ford and General Motors that will pave the way for an anticipated $2 billion in investments and the creation and retention of thousands of Michigan jobs. Those who doubt that the tax incentives offered were really necessary for the automakers to commit to those investments need to know that the auto companies stated, unequivocally, that these multi-billion dollar investments would not have happened here without them. Those investments, and those much-needed jobs could have gone elsewhere, rather than here in Michigan.

Other states are envious of our strong manufacturing base and work aggressively to lure away our industrial assets. They offer very lucrative incentives that include up-front capital, land, job training and a more manufacturing-friendly regulatory climate. Surprisingly, there are always some policymakers in Michigan that are willing to take up the charge to eliminate the incentives that keep our current industrial base strong. It is an ongoing battle, and one that MMA will continue to fight.

To be clear, economic incentives alone are not the only answer. MMA has led the charge on calling for changes to Michigan’s business tax system. The personal property tax on industrial equipment stands as a competitive barrier to manufacturing investment here, because most states have eliminated it.  In addition, the Michigan Business Tax includes a gross receipts component that disproportionately taxes manufacturers. These provisions place us at a serious disadvantage in our efforts to retain and attract manufacturers.

Michigan needs to reduce business taxes and maintain a competitive economic development program. It is not a choice of one or the other; we need both to grow the economy.

We’ve led the nation in attracting advanced battery companies to Michigan, which helps ensure the electrification of the auto industry happens here in Michigan. We’re making inroads on developing the state’s wind industry. Our critical tool and die industry is gearing up for better times to come. These industries earn incentives by producing jobs. This is not about winners and losers — it’s about jobs — and we’re seeing signs of recovery in manufacturing across the state. But, if we want to not only protect that recovery, but to shift it into overdrive, we need an economic development plan focused on retaining jobs and investment, fixing our state’s tax policy, and implementing structural reform.

We look forward to working with the new governor and the new legislature on all of these challenges to revitalize Michigan.

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