Tuesday, September 21, 2010

Michigan needs tax incentives to compete for jobs

Chris Knape | The Grand Rapids Press

GRAND RAPIDS -- Despite political rhetoric, Michigan needs tax incentives, lower taxes and fairer trade policies to remain globally competitive.

That was the collective conclusion of a panel of a top site-selection consultant and two economic development experts speaking Friday at the West Michigan Policy Forum.

Ron Pollina, a site selection consultant, said the country stands to lose many of the new "green energy" jobs it has created in wind, battery and other industries once subsidies run out if Congress doesn't create trade policies with the nation's interest in mind rather than special interests. Michigan also needs to create a more competitive environment.

"You have to change the business climate in this state or, long term, those companies won't be here," he said.

"The basic problem is in Washington, D.C.," said Pollina, author of the book "Selling Out a Superpower." "We have horrendous trade policies established by special interests."

For Michigan to quickly become more competitive, the state would do well to adopt a Right-to-Work policy, said Pollina. Doing so would take off the table some outsiders' concerns about problems with unions.

He also said Michigan has become less competitive because it has let some programs such as tax-free Renaissance Zones sunset while others have lost pace against more aggressive competing states.

"Your competition is not the surrounding states around Michigan, your real competition is global competition: Mexico, India, Brazil and China," said Pollina, whose company is based in Park Ridge, Ill.

Michigan has dropped in virtually every competitiveness metric measured by Pollina's firm. It was ranked No. 1 in 2004 for its incentives and economic development agency. Today it ranks 11th.

Overall it ranked 7th in 2004 and, today, ranks 31st in terms of total performance.

He blamed the sunset of tax-free Renaissance Zones and less competitive tax credits from the Michigan Economic Growth Authority for part of the drop.

Birgit Klohs, CEO of The Right Place Inc. in Grand Rapids, derided calls for the elimination of tax incentives. Doing so would immediately take Michigan out of consideration by many expanding companies, she said.

"I will be glad to lay down my weapons if 49 other states agree to do the same," she said. "We need a better tax climate, but if you unilaterally disarm me and my colleagues by cutting out incentives, then I'm out of this game."

Doug Rothwell, CEO of Business Leaders for Michigan, said Michigan needs to take a holistic look at reforming its tax system and simplifying tax incentives in order to remain competitive.

"The Michigan Business Tax equates to the highest corporate income tax in the country," he said. "We don't have enough assets to offset, compensate for the cost problem."
That being said, Rothwell said there are no quick fixes.

"There is no silver bullet for this stuff," he said. "I think that's something in Michigan that we fall in to. I am so sick of the economic development fad of the month."

E-mail Chris Knape: cknape@grpress.com and follow him on Twitter at twitter.com/Kcorner

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