Bipartisan legislation would end tax incentive “race to the bottom”

Interstate compact would bar subsidies to lure companies across state lines

LANSING, Mich., June 10, 2021 —A bipartisan group of legislators wants Michigan to opt out of destructive bidding wars to poach existing companies from other states with the promise of tax breaks or economic development grants. Under the recently introduced legislation (Senate Bills 523 and 524, House Bills 4971 and 4972), Michigan would enter a compact with other states agreeing not to offer new subsidies to specific companies. The bills were sponsored in the Senate by Senate Minority Leader Jim Ananich (D-Flint) and Sen. Aric Nesbitt (R-Lawton), and in the House by Minority Floor Leader Yousef Rabhi (D-Ann Arbor) and Rep. Steve Johnson (R-Wayland).

“It happens all too often: states engage in a race to the bottom with hopes of landing the next big company, many of which never end up making good on their job creation promises,” Ananich said. “The compact is a handshake between states to protect our collective residents from these taxpayer-funded circuses. The funds we save should instead be used to fortify programs that matter to every employee and employer.”

“Regular taxpayers bear the burden when states give sweetheart deals to specific companies,” Nesbitt said. “An interstate compact will enable our state to end these destructive deals without losing our competitive advantage.”

“We are all better off when states compete to invest in their people and their infrastructure,” Rabhi said. “By ending the spiral of corporate giveaways, we are freeing up resources to build the basis of true prosperity—good roads, public services, reliable utilities, and healthy, educated people.”

“This is a chance for Michigan to stand together with neighboring states to protect taxpayers,” said Johnson. “We all win when the playing field is level for fair competition.”

The more states that opt to join a compact, the more impact it will have. Legislators in fourteen other states have introduced compatible legislation this year. State and local governments give away an estimated $95 billion in subsidies every year, but many economists argue the subsidies do not pay off in job creation or economic growth.

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