In May Gov. Snyder Touts New Flat Tax As Best Lure For Business. In June Offers Sears $50M In Tax Incentives To Relocate HQ

Small businesses owned by individuals, couples and families do one thing really well: take out as much money as possible from the business, and minimize the tax burden as much as possible. This can be confirmed by just about any small business owner you meet. Michigan’s new business tax that exempts small business owners from taxation in the hopes that these people will create oodles of new jobs with the extra money is sheer lunacy.

Why?

Even a business that grossed $1,000,000 in revenue wouldn’t enjoy tax relief significant enough to justify hiring more employees full-time, paying a good salary, and providing those employees with benefits. Small businesses are desperately trying to pay the employees they have now, and trying to figure out why Blue Care Network and Blue Cross and Blue Shield need to raise rates by 10-30 percent annually. Though the U.S. government considers a business with fewer than 500 employees to be a “small” business, according to the Journal of Extension, 94 percent of businesses in the United States fall into a category called “micro-businesses.” These companies employee 10 or fewer people. Half of our country’s 110,000,000 workers are employed by micro-businesses.

Again, according to the Journal of Extension, “Overall micro-business owners reported a mean gross business income of nearly $136,000 and employed 2.34 workers.”

What is a business owner with revenues between $136,000-$150,000 per year going to do with Governor Snyder’s tax break? Those business owners will take the additional revenue as income, for starters, because the tax break will amount to only $1,500-$3,000. If the business owners don’t take the additional revenue as income, they will apply it toward the cost of their own health care benefits, which average $9,000 per year for a family and $5,000 per year for an individual.

Snyder’s tax plan will not entice micro-businesses to create oodles of new jobs. How can they possibly create new jobs with an additional $1,500-$3,000 in revenue?

Add to this the fact that since Michigan ended (for some companies) tax breaks, on June 23, 2011 LivingBlue reported that:

Brighton appears to be one of the first communities in Michigan to lose jobs due to Rick Snyder’s plan to “reinvent” Michigan.

Fronius USA, a solar company with its American headquarters in Brighton, says it is moving to Indiana due to tax incentives, where it plans to create 512 jobs by 2016. The state of Indiana said its offer of $4.25 million in tax credits and other incentives prompted the move.

Snyder is getting rid of incentives and instead cut business taxes by $1.7 billion by dumping the taxes on senior citizens and the poor. But even though Fronius, as a limited liability corporation, would not owe income taxes in Michigan under the new law, it’s not enough to keep the company in Michigan.

According to the Detroit News, Spartan Motors Inc. is moving some its operations from Michigan to Indiana, too. According to Inside Indiana Business, “Spartan Motors, Inc. (Nasdaq: SPAR), a manufacturer of specialty chassis and vehicles, will be relocating its recreational vehicle chassis manufacturing operations to Wakarusa from Michigan and creating up to 60 new jobs by the second half of 2012. The company plans to invest an estimated $1.8 million on machinery, equipment, tooling and facilities.”

Now, add this disturbing tidbit into the mix. CapitolFax.com, a site that cover the Illinois state legislature, reported on June 27, 2011 that the Michigan Economic Development Corporation, in conjunction with Oakland and Wayne County officials, were offering Sears, Inc. $50 million dollars to move its headquarters to Michigan. According to CapitolFax.com, “The incentives being offered are said to include a mix of tax breaks, relocation grants, housing incentives and more. […]”

Tax breaks?

I thought Michigan wasn ‘t relying on tax breaks to lure companies to our state any more.  I thought Michigan’s Nerd-in-Chief was luring businesses with a flat 6 percent corporate income tax, funded by taking candy from babies, money away from old people, poor people and the state’s K-12 and university systems?

Evidently, I’m not the only person who was under the impression that the 6 percent flat tax for business was supposed to lead to incredible tales of job creation the likes of which we haven’t seen since Snyder was the CEO at Ann Arbor SPARK.

On May 11, 2011 the Center for Michigan reported in a piece titled “MEDC readies itself for life without tax credits” that, “[I]f Snyder’s business tax overhaul plan is approved by the Legislature, as seems highly likely, Michigan will later this year largely end its decades-long practice of doling out large tax credits to attract jobs. Instead of using tax credits, the Michigan Economic Development Corp. will try to lure business investment with a simplified, 6 percent corporate income tax that will slash business taxes in the state by 82 percent, according to CFM calculations.”

Snyder’s former Ann Arbor SPARK co-conspirator Michael Finney, whom Snyder took with him to Lansing and put in charge of the MEDC based on Finney’s unverified and unverifiable job creation and job retention “successes” at Ann Arbor SPARK, told Center for Michigan: “We’re going to do away with a lot of the incentive programs and focus on reducing the cost of business for everybody.”

So how come just one month after Snyder signed the tax reform law that was supposed to lure businesses to our state by offering a flat tax, Finney and the MEDC are offering Sears $50,000,000 (including tax breaks) to come to Michigan and create 5,000 jobs? The governor also has said that companies seeking incentives for business locations and expansions could go directly to the Michigan Legislature and seek relief through the appropriations process. Should we expect the CEO of Sears, Inc. to appear before the Michigan Legislature and its Appropriations Committee any time soon?

In his campaign for governor, Snyder criticized the MEDC’s broad use of tax credits as unfairly benefiting certain businesses and said they should be ended in favor of a simplified tax system that cut taxes for all businesses.

On the MEDC web site, Finney writes, “We will replace our complex incentive-based way of doing economic development with a restructured tactical toolkit, built on the foundation of a simple tax.”

So, can someone explain to me very slowly and using small words how offering Sears, Inc. a $50,000,000 incentive package, including tax breaks, is bringing business to Michigan based on the “foundation of a simple tax,” or bringing business to Michigan without the “broad use of tax credits as unfairly benefiting certain businesses?”

So much for Governor Snyder’s Grand Tax Experiment whereby the flat 6 percent Michigan business tax would be used to level the playing field and lure businesses to Michigan that would, in turn, create oodles of great jobs. The Grand Tax Experiment lasted exactly one month before the MEDC went off to Illinois and offered Sears, Inc. a familiar sales pitch: Come to Michigan; the state’s taxpayers will subsidize your company for decades.

Rick Snyder was a charlatan when he headed Ann Arbor SPARK, as was Michael Finney. Snyder claimed in a 2008 Annual Report to have created or retained over 12,000 jobs in Washtenaw County between 2006-2008. Problem was, Ann Arbor SPARK neither collected nor compiled any data to back up those out-sized claims. Finney then took Snyder’s place as CEO of Ann Arbor SPARK, and proceeded to make similarly outlandish job creation and job retention claims which were not verifiable, either. Ann Arbor SPARK under Finney’s stellar leadership got nailed during a routine audit for accounting irregularities and conflict of interest issues.

The foxes then moved from Ann Arbor to Lansing, and they are in charge of a multi-billion dollar hen house now. The scam was to pass along tax breaks to “business” to fuel job creation. The truth of the matter is that the majority of that $1.8 million will go directly into the pockets of business owners across the state, and job creation will be minimal, at best.

When Snyder signed the new tax reform law, Leigh Fifelski of Progress Michigan told the Rochester Tribune, “Michigan families on Main Street will be subsidizing Wall Street and greedy insurance company profits for years to come. Gov. Rick Snyder’s tax sham will only hurt ordinary Michigan citizens, kids and seniors.”

Governor Pat Quinn will, to be sure, work with Sears so that the company does not leave Illinois.