Michigan's proposed Tax Incentive is Dead. Here's why.

 Why the Tax Incentive Failed

Once there was a successful tax incentive designed to foster and stimulate a new entertainment-based industry in Michigan. It was cancelled in 2012, mainly over partisan posturing with a new administration taking over. In 2024, there was a real push to try and reinvigorate interest in a new, modified tax incentive. That push mainly fell on deaf ears, and the tax incentive, while not overtly murdered, was considered dead before Christmas.

While there was much hope for the passing of the tax incentive, a practical assessment of what the proposal offered reveals a relatively short-sighted plan. It was a proposal that required participation from businesses outside of the state and offered no discernable benefit for the state as a whole beyond the prospects of an indeterminate financial gain.  And yet, to achieve this limited benefit, another bureaucratic layer of accounting involving a minimum of three separate entities - the local businesses, the outside businesses, and the state government - would be imposed on those that chose to participate.

What follows is a more detailed overview of the tax incentive and its inherent limitations from a practical business perspective.

 

The proposed tax incentive:

-          Requires the participation of companies from out of state by enticing them to bring their business to our state with the lure of reduced production costs. This forces Michigan into agreements with unfamiliar, potentially unscrupulous business entities attempting to exploit local resources and citizens. Unfortunately, as successful as it was before being shut down with the change in administrations in 2012, we saw instances of this questionable behavior with the previous tax incentive.

 

-          Requires local businesses to enter into agreements with these aforementioned entities in a taxation arrangement intended to profit our local economy. Potentially beneficial to be sure, but at the cost of imposing another layer of legal complexity over accounting methods that are already notoriously complex. As a result, the tax incentive appears to complicate rather than facilitate production.

 

-          Does not provide any realistic strategy for building and sustaining the industry over a prolonged period of time. No practical estimates for growth within even a basic 5-year structure. The tax incentive relies entirely on the assumption that outside businesses will think the state is prime real estate for investment and development, and agreements will manifest that will benefit Michigan’s overall economy somehow.

And yet, along with this assumption of growth is the recognition that the crew and talent based in Michigan are concentrated in specific regions, isolating opportunities for economic growth.

Even further, there would not be enough personnel to fulfill the potential demands for services from these outside businesses should that industry continue to grow as hoped. In other words, even if the tax incentive were successful, Michigan could potentially fail to meet the demand, thus failing to significantly achieve the full potential of its own design.

Worse still, along with these assumptions and recognition, the tax incentive offers no plan for building an effective infrastructure that would be capable of meeting these hypothetical future demands.

Finally, the tax incentive offers no practical method of building a sustainable local industry that benefits Michigan as a whole. There is no specific plan for investment or infrastructure that would help the development of existing local resources, nor provide significant long term employment opportunities. It simply requires outside resources and investment to pay the wages for local personnel and temporarily stimulate random locations where production may occur. Beyond a comparatively minor profit, there is no real incentive for local businesses to participate with an industry that they may have no practical interest in from the outset.

 

In summation, the proposed tax incentive relies on random, outside companies and interests agreeing to engage in a structured taxation agreement without clearly demonstrating any significant profit, or overall benefit for the state. 

Simply put, from a practical business perspective, all that the tax incentive truly offers Michigan is the opportunity for its local industries, citizens and resources to be exploited by out of state interests for the immediate benefit of the very few who choose to participate.

 

Naturally, it was rejected.

© March 2025, Brad Havens. All rights reserved.