Do Tax Breaks Work?

By: Beth Shayne Email
By: Beth Shayne Email

Neogen's investment in the city of Lansing is linked to one. Emergent Bio Solutions expansion too. Smart Office Solutions, Niowave, Demmer. All are not paying the city's full rate in taxes thanks to a tax abatement the city believes brought or kept them here.

Lansing Economic Development Corporation president Bob Trezise says an urban area like Lansing could not compete against townships with lower taxes without them.

Other states use them too.

Trezise and others believe they are job creators. The question? It is worth the cost.

New research out of MSU and Wayne State says Michigan municipalities are giving up a billion dollars a year on industrial abatements alone. The studies authors, Dr. Laura Reese, MSU, and Gary Sands, WSU, write that cities waste money trying to save dying manufacturers. The study says suburbs are attracting growth that would've come with or without the money.

A major problem--the study says--is accountability for the companies who got the break. It says 55 percent of municipalities don't evaluate after the fact.

"All of our tax breaks require a lookback after 2 years," Trezise says of Lansing. He says the city only grants a fraction of the requests, but does admit the tax break is not linked to a specific goal for jobs.

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  • by Pam Location: Jackson on Oct 4, 2007 at 08:53 AM
    Most companies love to increase their profit. Most tax abatement increase the bottom line. If a company truly needs a tax abatement to stay in business then it will be more detrimental for those business to fold up. When Walmart moved into jackson, it cut it cost by building right at the edge of city limits and the car dealerships moved out of the city because they did not want to pay the 1% income tax. Now if they were asking for tax abatement to improve drainage or community utilities that should be considered. But not to give a company a tax break to move into the city.
  • by Robert on Oct 4, 2007 at 06:14 AM
    Accountability is indeed the biggest issue. Companies bully cities and states into granting abatements and exemptions, threatening to take jobs elsewhere. Hardly any are required to follow through with their promises, and there is no significant governmental oversight to ensure they do. Even the pro-business Mackinac Center is skeptical of the value of these tax breaks. If these companies wanted to be good corporate citizens, they would pay their taxes just like everyone else.
  • by phillip Location: holt on Oct 4, 2007 at 05:41 AM
    JOBS. right now mich people need them in the worse way.not part time jobs or temp jobs,but full time work state wide.when they say there's jobs the part time or temp jobs should not be included in reports.temp jobs do not always end up hiring a person,and while working the temp service gets part of ones pay and the company does not have to carry insurance on a person,only comp.the temp service and the employer get the best end of the deal.part time work will not pay your bills no better than mim.wages.therefore many have to apply for assitance programs from the state.and what you get total is almost impossible to get buy on.the US neededs to figure out why jobs went over seas and find a better way to make bussiness want to stay.we all know it deals with profit and greed.laws need to made to make it harded for leave.higher import taxes to ship stuff back or something to make them want to stay here and avoid the hassels and costs of leaving.and futher costs to ship back.
  • by David Location: MI on Oct 4, 2007 at 04:10 AM
    I don't agree giving tax breaks to businesses. They should be subject to the full tax rate just like everyone else. In the long run, its the community who gets hurt.
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