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Bad Ending For ‘Good Jobs’ Tax Breaks On House Floor

June 27, 2017

Courtesy MIRS News

The wheels came off attempts to pass the Good Jobs for Michigan tax break package Tuesday night as Republicans accused the Governor of cutting side deals with House Democrats behind their backs.

After 11:30 p.m. Tuesday, an angry-looking House Speaker Tom Leonard (R-Dewitt) emerged from caucus to say a vote on the bill would be held off until at least July 12 when Gov. Rick Snyder returns from Europe and can meet with the caucus. 

“Over the past couple hours, I received information that raised serious questions as to whether or not the governor cut a deal with the Democrats that would undermine Republican caucus priorities,” Leonard said in a scrum with the Capitol press corps close to midnight. “As such, I took that information to my caucus. We discussed it as a caucus and, unanimously, we agreed to hit the pause button on the Good Jobs legislation until the Governor gets back from Europe, can look me in the eyes, can look the caucus in the eyes and can explain to them the answers to the questions we have at this point.” 

He declined to explain what that information was or what Republican priorities would be undermined. 

“We believe that deals may have been cut with the Democrats that were never discussed with us,” was as far as he was willing to explain it. 

House Minority Leader Sam Singh (D-East Lansing) appeared equally riled. 

“We spent all day today trying to get amendments that would make Democrats comfortable getting this bill out of committee and we were able to get those amendments. There were nine of those. Five or six were ones that we had specifically asked for. And those have brought us to an ability to be able to vote for this,” Singh said. “I believe that we should have voted today because we were ready to bring Good Jobs to Michigan.” 

MIRS has since found that the House Republicans learned Snyder made five or six pledges to Democrats in exchange for their votes on the tax incentive package that he saw as a carrot to lure Foxconn, the manufacturer of iPhones, to Michigan, bringing 5,000 jobs and $4.2 billion of investment with it. 

The most eye-popping deal was a pledge to not support “labor relations” reform policy, or those bills unions felt would be damaging to collective bargaining or labor organizing. 

One source described to MIRS the House Republican caucus as like “Hiroshima” when news hit about a list of five or six things the administration signed off on in exchange for the Democratic votes on Good Jobs. 

“The caucus felt completely betrayed,” another source told MIRS, adding the caucus appeared unanimous about not doing the bills Tuesday. 

Before that caucus and after the Tax Policy Committee meeting, MIRS has learned that a supermajority of House Republicans were in support of the package, and that was after Leonard told the caucus he was a no vote. 

Part of the issue is that some House Republicans feel they have seen this type of behavior before with Snyder — cutting side deals to extract votes from Democrats. The road package and Detroit Public Schools being two more recent examples. 

When asked if the administration had cut any special deals with the Democratic caucus, Snyder Director of Communications Ari Adler said, “The Governor has been talking to Republicans and Democrats on the best way we can bring jobs to Michigan.” 

Pressed again on whether the Governor could look Leonard in the eye on his return from Europe and say that no special deal with Democrats was cut to ensure the votes were there to pass Good Jobs, Adler said, “The Governor is looking forward to meeting the legislative leaders next week so we can all get together and find out the best way to bring thousands of more jobs back to Michigan.” 

Up until Tuesday, House Democrats held off votes on the Good Jobs package because the Governor connected the Michigan Public School Employees Retirement System, or MPSERS, reforms, which they were unanimously against. They figured if the Governor agreed to do a House priority, MPSERS reform, in exchange for running the Governor’s priority, Good Jobs, the two issues were linked. They weren’t going to support Good Jobs without some of their priorities addressed.

Earlier in the evening, the House Tax Policy Committee voted 9-3 to report the main bill to the House floor after making a series of amendments to bills. 

Rep. Peter Lucido (R-Shelby Twp.) proposed an amendment to give the incentives to larger business expansions, providing up to 3,000 jobs. But the pay rates would be lower than incentives for businesses providing 250 jobs or 500. The amendment passed. Lucido also had another amendment to include suppliers in the tax incentive, if they employ at least 25 employees. 

Rep. James Lower (R-Cedar Lake) proposed the bill be sunsetted in December 2019, which was also approved by committee. 

An amendment offered by Rep. Wendell Byrd (D-Detroit) would give local governments a say on whether the tax breaks are awarded to businesses. He said that would add local control to the proposal. 

Tax Policy Committee Chair Jim Tedder (R-Clarkston) proposed reducing the overall cap on the program from $250 million to $200 million. 

Rep. Bronna Kahle (R-Adrian) proposed an amendment stating the number of jobs a company acquires in a merger cannot be counted toward the tax credit. 

Rep. Jim Ellison (D-Royal Oak) offered an amendment requiring a good faith effort to hire Michigan residents for the jobs created through this package. 

All those amendments passed. But committee rejected an amendment by Rep. Martin Howrylak (R-Troy) to treat disbursements from the Michigan Strategic Fund like any other appropriation. 

In the 9-3 vote to report the bill, Howrylak and Reps. Steve Johnson (R-Wayland) and Abdullah Hammoud (D-Dearborn) voted no. 

The bill would have given Snyder his prized request out of the spring session. Democrats and several conservative Republicans had held out on supporting the package, but various amendments made to the bills has brought the Democrats over. 

The “package”–  SB 0242, SB 0243 and SB 0244 — offer 50 to 100 percent abatements on a business’ employee tax withholdings, depending upon the number of jobs they create and their wages. 

With those amendments, Singh said the package would be more acceptable to Democrats. All of his members, but one, voted to move the bills. 

“For us, the keys were that we had a sunset on this and then scaling back the initiative itself. Those two things will ensure that there will be enough Democratic support to support this package going forward,” he said. 

Last week, Singh had said Democrats had concerns about the package. 

“I think what’s different here is that the incentives are very different than the incentives of 15-20 years ago because they are tied to new jobs and that has to occur before they receive the set of resources that are being provided,” he said. 

Hammoud said, “I had my reservations about this package when it came to the political aspects,” referring to the purported deal to move the Good Jobs package in exchange for teacher pension reform. He voted against the package because, “I consider this package to be a race to the bottom.” 

The selling point of the “Good Jobs,” is that no tax incentives are issued unless the company can verify that the promised jobs were created. That’s different from the no-longer-issued Michigan Economic Growth Authority (MEGA) credits. 

The bills have had overwhelming support, aside from a few conservative holdouts. Sen. Jim Stamas (R-Midland), a primary sponsor of the legislation, was frank that “this legislation is specific to big industries coming to Michigan.” He said the legislation would set Michigan apart from other states. 

Sen. Wayne Schmidt (R-Traverse City) and Sen. Steve Bieda (D-Warren) are the other sponsors. 

There’s been support from basically every economic development organization in the state, along with Snyder and municipal officials. 

SB 0242 would amend the Michigan Strategic Fund Act, and SB 0243 and SB 0244 would make complementary amendments to the Income Tax Act and Revenue Act, respectively. 

The incentives would go to businesses that propose to create a minimum of 500 certified new jobs in Michigan with an average annual wage that is equal to or greater than the average wage in its “prosperity region.” 

Also eligible would be a business that proposes to create a minimum of 250 certified new jobs that pay an average annual wage that is equal to 125 percent or more of the average wage in its “prosperity region.” 

The Michigan Strategic Fund could enter into no more than 15 such agreements each year and could not disburse more than $200 million in total withholding tax capture revenues over the life of the program. 

The General Fund would reimburse the revenue if the tax break results in any loss to the State School Aid fund. 

Snyder touted the package on Mackinac Island recently, saying he expected the package to spur several development projects. 

“We have a couple that are in the 2,000 job-plus range that are active opportunities. I can tell you these are above-average wage jobs, too, to emphasize,” Snyder said. “I can tell you there are at least a couple of opportunities I know of in the 300-plus job range that are real. You’re next question is going to be who. I’m not going to tell you.”

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