LANSING – State Representatives Andy Schor (D-Lansing), Jim Townsend (D-Royal Oak) and Bill LaVoy (D-Monroe) introduced a bill package today that would bring stability and transparency to the budget-busting MEGA business tax credits. This comes as the Senate Fiscal Agency released a report citing that the state paid $52 million in net tax refunds to businesses in March due to the MEGA tax credits. 

The MEGA program has come under fire after causing an unforeseen budget shortfall in January, forcing the legislature to make mid-year budget cuts to education and public services. A further examination of the MEDC’s efforts to hand out MEGA credits shows that the agency had allowed businesses to renegotiate how much they would get in credits, increasing their total value to $9.4 billion.

The legislators’ bills would restrict new MEGA credit contracts and any amendments to existing contracts that would increase the state’s financial liability or make it easier for corporations to claim the credits, while also implementing common-sense accountability and transparency measures to prevent unpredictable budget deficits.

“These credits were created and used originally as a tool to bring jobs to Michigan during the Great Recession,” Rep. Schor said.  “The state budget is very sensitive and we want to create jobs, but we need to balance increased credits against deficit state budgets that lead to cuts to schools, public safety and other important services provided by the state.  These bills will ensure the predictability and accountability that we need to hit the proper balance.”

The bills would:

  • HB 4474 (Schor) would restrict any new MEGA agreements or amendments to existing agreements that increases the liability or makes it easier for a business to quality for the credit. It also requires notification of any future amendments prior to being approved.

  • HB 4472 (Townsend) would require that businesses claim the credit within 210 days of it being approved by MEDC. The current absence of a solid timeframe for when the credit can be claimed has been one of the causes of the recent unpredicted shortfalls.

  • HB 4473 (Townsend) would provide an alternative to the previous legislation, placing an annual cap of $400 million for MEGA credits claimed every year. A business can wait longer to receive the credit, but the state can still budget for the upcoming obligations.

  • HB 4471 (Townsend) would require the MEDC to provide monthly reports to the nonpartisan House and Senate Fiscal Agencies, as well as the legislature and the governor.

  • HB 4475 (LaVoy) would require the Dept. of Treasury to submit regular reports to the nonpartisan House and Senate Fiscal Agencies to ensure that state economists can better project annual budgets.

    “Due to these MEGA credits and the $2 billion corporate tax break in 2011, the state is actually paying out more to businesses than it brings in some months,” Townsend added. “Last month the state paid businesses $52 million in net tax refunds. This comes as Michigan taxpayers are filing their taxes and seeing fewer and fewer tax credits, crowded classrooms and crumbling roads and bridges.”

    The bills were sent to the House Committee on Tax Policy. Townsend serves as the minority vice chairman and LaVoy is a member of the committee.

    “We have seen our state government try to cut deficits by raising taxes on middle class families and cutting public services,” LaVoy said. “Our goal is to increase transparency in MEGA agreements, while we work to develop a fiscally responsible economic environment for businesses looking to grow or relocate to Michigan.”