More Bad Tax Policy from Michigan

April 24, 2008

There must be something in the water of the Great Lakes given how bad tax policy is in the region, and it's hard to argue that it's any worse than in Michigan in recent years. But even when the state is cutting taxes, it doesn't do that right, as is seen in this article from MLive:

The state Senate on Thursday passed tax breaks potentially worth up to $35 million a year to entice Hemlock Semiconductor Corp. to build a new facility in Michigan.

The company near Saginaw is the world's largest maker of polycrystalline silicon, a material used in solar panels and semiconductor chips. Hemlock Semiconductor already is adding 500 jobs through a $1 billion-plus expansion in Hemlock but is considering other expansions, too.

The legislation approved 35-2 would let the company claim a credit for some of its electricity costs against the Michigan Business Tax for 12 years starting in 2012, if it builds another new or expanded facility in the state. Like a recently enacted law aimed at attracting the film industry to Michigan, the credit would be refundable. That means the state treasury could cut a check to Hemlock Semiconductor if its tax bill is less than the credit it receives.

Many sponsors of the six-bill package represent areas in and around the company, which is a joint venture between Midland-based Dow Corning Corp. and two Japanese companies.

"We can't afford to miss out on this opportunity," said Sen. Tony Stamas, R-Midland, adding that Michigan needs more high-tech, good-paying jobs.

In addition to this special tax break for one company, the article also cites the fact that the state recently passed special tax credits for the film industry. These two policies that amount to using central planning in an attempt to revitalize Michigan's economy would more appropriately fall under the heading of Dumb and Dumber as opposed to sound tax policy. And while the state is giving some companies the "upper hand," it is chopping off the hands of everyone else. That's because somebody is going to be paying for these special tax cuts for a select few companies, and it's going to be paid in one of two ways: lower spending for the state's citizens or higher taxes on other companies (and citizens of the state).

Special tax credits for specific companies (most notably sports teams and film companies) can be easily summed up in one phrase: corporate welfare.

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