Really Not Picking Winners

Governor Snyder in his State of the State address announced the state would no longer pick winners and losers. The way he proposed to implement that was by expanding eligibility for subsidies from the state’s Twenty First Century Jobs Fund to all industries rather than just a few pre-selected industries.

It’s a curious way to stop picking winners: expanding the number of companies that can be chosen as winners. If the goal is to stop picking winners a far better way to do it would be to eliminate the fund altogether. Why should the state be in the business of providing capital to so-called promising enterprises at all?

But far more egregious are the so-called tax credits provided to the alternative energy and film industries. The Governor said nothing about eliminating those subsidies. First let’s get the facts straight. These are simply subsides – not tax cuts – for two chosen “winning” industries. (How these two are the only industries that deserve this kind of subsidy is hard to imagine.)  The “tax credits” pay part of the companies operating expenses, far in excess of their tax liability to the state and local governments. And they are very expensive:  the film tax credit is estimated to cost $140 million annually and the alternative energy – largely batteries – tax credits when fully phased in will cost something like $315 million by 2014.

To put this is perspective the $455 million dollars in annual alternative energy and film industry subsidies is more than the state spends annually on community colleges (around $300 million dollars) and around twice the cut in state spending for public universities that has occurred since 2000. Ask yourself “both in terms of immediate jobs and long term economic impact which benefits the state’s economy the most: these industry subsidies or support for higher education?” To us the answer is clear. Spending on higher education is far more likely to produce more jobs immediately than either of the chosen industries (the official job estimates are almost certainly exaggerated) and almost certainly will have a greater impact on the Michigan economy long term.

Our priority for growing the Michigan economy is to insure a quality and agile higher education system. Others have  different priorities. What is most troublesome is that this debate about how best to invest in the growth of the Michigan economy never takes place. Because the subsidies are placed in the tax code, not appropriations bills, the trade off between higher education (or any other state spending) and these industry subsidies is never considered. Big mistake!

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