GOP lawmakers are eying the extension of a tax incentive program that encourages companies to create thousands of above-average paying jobs in exchange for keeping new employees’ income tax withholdings. The Good Jobs for Michigan (GJFM) program is set to end this December, after providing three firms a sum of $57.4 million in tax benefits over the past two years.
About the program
Senate Bill 242 was enacted into law by Governor Rick Snyder back on July 26, 2017. The GJFM program was introduced to promote more jobs by incentivizing companies to hire hundreds or thousands of new employees on higher salaries. In exchange, the program allows these businesses to retain their new employees’ income tax withholdings as a reward for creating new jobs.
In the first level of the program, businesses that employ at least 500 new workers with salaries that are above the regional average are eligible to keep up to 50% of the personal income tax withholdings of these newly hired workers. The second level allows companies that create at least 250 new jobs and pay salaries that are 125% or more above the regional average get to keep up to 100% of the personal income tax withholdings of their new hires.
The regulation was seen as a great scheme to increase job opportunities, and as a possible solution for Michigan’s high Youth Unemployment Rate, which was at 10.6% in 2016.
Of course, more local efforts have also been launched to combat unemployment since then, like the Detroit at Work program that provided demand-driven training sessions. These mostly revolved around technical skills training needed to meet the demand for new hires in technology, healthcare, and manufacturing. Indeed, workers in Michigan can look forward to job growth in professions like computer systems analysis and credit counseling — but even management analysts and database administrators are lucrative options for today’s youth and first-time workers. US News reports that management analysts can make a median salary of $82,450, up from a $47,510 starting salary with a 14.22% job growth. Database administrators, meanwhile, face an 11% career growth over the next few years, starting at an entry-level wage equaling $49,330. Responsible for ensuring the integrity and security of data for organizations, database administrators can earn a median salary of $87,020 — as Maryville University’s industry outlook for computer science graduates reports. This promising career path can be especially attractive for fresh graduates looking for their first job. It’s these kinds of opportunities that the GJFM secures for the youth and the unemployed through encouraging companies to pay high salaries to their employees.
A new face for the old guard?
However, not everyone agrees that it’s in Michigan’s best interest to extend the program. A study from Michigan State University, which looked at the effects of the 1995 Michigan Economic Growth Authority (MEGA) law, found that tax incentives did not actually help develop the economy. The authors argue that taxpayer money is better spent on basic local public services and investments in downtown, instead of tax benefits for large corporations. The MEGA law’s structure has been compared to the current GJFM’s incentives for corporations and has been a source of criticism for the program.
Mackinac Center‘s Michael LaFaive summarized the disapproval when he wrote: “[W]hen you’re an advocate for the interests of large corporations the economic development programs you support inherently tend to favor big business over broad-based economic freedom.” He added: “Perhaps all of the similarities — including identical language — between the old MEGA and the new MEGA (GJFM) is just a function of the old guard wanting to go back to the way things were, and without regard to consequences or costs to taxpayers.”
GOP lawmakers will have to battle it out with critics in the fight to extend the program. Only time will tell what the future holds for the beneficiaries of the GJFM law and whether its effects are worth the cost in the end.
Written for: https://michiganchronicle.com/