Michael D. LaFaive, Mackinac Center for Public Policy
Looking back on the first quarter of 2023 it is not hard to be reminded of James Coffield’s famous description of the British income tax system as “Scaffolding for Plunder.” Yet in Michigan recently it feels broader, as if it is the whole government system working to plunder us, not just the tax system.
Regardless of the political party in charge, many of us know or sense that we’re shouting “stop” into a void. Michigan’s elites and elitists in government and business are together running roughshod over the very people they force to pay government’s bills. The only fixes may be constitutional.
One good example of this involves corporate handouts. In the last three months alone, Lansing politicians have appropriated a staggering $3 billion in direct subsidies for a handful of corporations. Not only is this unfair — forcing all of us to underwrite the private interests of a favored few — but it is ineffective. The majority of independent scholarship shows such programs don’t create the jobs promised or at least not in a cost-effective way.
They can, however, result in windfall profits for powerful corporations who would have likely created jobs without incentives. Their political handmaidens also do well, increasing the likelihood of favorable headlines, ground-breaking photo-ops and, in some cases, reelection. These subsidies are political tools wearing the mask of economic development policy.
Companies that make political contributions are four times as likely to receive government subsidies than those that do not. The subsidies are on average 63% larger. One determinant of a large increase in state corporate handouts is whether a state’s governor is up for re-election. Cities who have elected mayors lavish larger subsidies on corporations than cities without an elected head. The list goes on.
Corporations, politicians and their lieutenants in state agencies have a symbiotic relationship, and together they’ve grown Michigan’s parasite economy. Who pays? The rest of us, with slower growth, higher tax bills than would otherwise be necessary and opaque, if not misleading governments. This group works hard to protect its turf.
Michigan’s economic development agency has repeatedly bought questionable studies to puff up its purported efficacy. It also aggressively blocks or ignores attempts to acquire information that might illuminate its failures. It even keeps its offers of taxpayer cash secret by using non-disclosure agreements. Transparency might otherwise open it up to damning criticism and threaten elites’ financial and political gravy trains.
And this is just in one area where politicians unfairly award the favored few with special favors. There are others. A bill was recently introduced that would swap out union members’ dues for taxpayer money. It’s likely the unions would use a percentage of it to engage in politicking. In other words, your dollars, their politics.
Another new bill would permit the creation of “solar energy districts” and would be approved locally. It would require votes by those who own 50% of the assessed property value. That is, one or two large property owners could theoretically vote to create a solar district and drag others along with them. The same bill would immediately grant tax exemptions for the districts. In addition to playing favorites, the bill will promote the construction of far more solar energy across the state.
But solar is already a heavily subsidized, unreliable, and expensive energy resource that is gobbling up valuable farmland, at the same time as it relies on questionable labor practices and threatens a massive increase in environmental impacts.
If it seems like the “policymaking process” has been captured in a way “that serves the well-off at the expense of the general welfare,” then join the club. In their book, “The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality,” authors Steven Teles and Brink Lindsey argue that it is government that is pushing markets and income equality in “an inegalitarian direction.” Upward, that is.
What is the solution? There’s no panacea, but this authors recommend constitutional prohibitions on the power of lawmakers. These could include a Sustainable Michigan Budget amendment or a prohibition against granting fiscal and other favors to specific corporations or industry.
Michigan state government suffers from too much favor seeking and granting. The alliances between corporate and political classes result in harmful and expensive policies. If thwarting those takes changes to our constitution then so be it.
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Michael LaFaive is the senior director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy, where he has worked since 1995.
