[This article originally appeared on April 14, 2005.]
While the City Commission is busy deciding which hoteliers in downtown G.R. will be the winners and which the losers, Governor Granholm is engaged in the same folly at a much grander scale. On Tuesday Toyota Motor Corporation announced a deal with Guv Jen to buy 690 acres of state land south of Ann Arbor for $11 million to build the company new North American research and development center in exchange for receiving from the state a $38.9 million tax subsidy.
Guv Jen justified the special hand-out to Toyota because the company's new R&D center will employ 400 people and create another 300 "indirect" jobs in the local community. The nearly forty million tax subsidy is in the form of credit against the state's convoluted single business tax. No doubt the SBT, as it is commonly referred to, is a disincentive for businesses to start up or re-locate or grow in Michigan. If the governer can see benefit of a special reduction of this tax for Toyota, because it will produce jobs and prosperity, why not cut the taxes for all businesses?
Simple answer: Doing that would take away her power to pick winners and losers. Whether or not that's a power we should let our elected officials have is one thing. As a practical matter, do our pols make the right choices? Ever since the State of Pennsylvania recruited Volkswagen to build a plant there in the late '70s, the practice has been to give big tax breaks to get big companies to build big plants in our backyards. Guv Jen has followed suit with the Toyota deal. Bad choice.
Study after study shows that small business is the engine of job growth in this country. Meanwhile, tax breaks for the big guys seldom repay the taxpayers' "investment" in them. For example, where's that Volkswagen plant in Pennsylvania now? Shuttered a long time ago, folks. So, it's better policy -- heck, it's just plain fair -- to cut business taxes across the board to stimulate growth (if that's the objective) than to select favored companies to receive targeted tax breaks and subsidies. But sound business tax policies don't garner the headlines like a hand-out to Toyota does when Guv Jen is ready to mug for the cameras.