MEGA DISAPPOINTMENT

May 17, 2007

Michigan's government-subsidized incentives program -- the Michigan Economic Growth Authority (MEGA) -- was supposed to create two types of jobs: Direct new jobs at specific firm sites that receive incentives from MEGA and indirect jobs created outside the specific job sites in response to the MEGA-generated investment and employment.  Unfortunately, the incentives haven't worked, say Michael LaFaive and Dr. Michael Hicks of the Public Policy Foundation of West Virginia.

Consider:

  • MEGA's incentive packages did not improve Michigan's per-capita personal income, employment or unemployment rate.
  • MEGA did not improve the per-capita income, employment or unemployment rate of any county in Michigan; in each county, the researchers estimated the range of impact somewhere between zero and modestly negative.
  • Michigan counties that did not have companies receiving MEGA incentives performed as well, economically, as those counties that received the benefits.

Further:

  • MEGA did not affect the aggregate income or employment in manufacturing and warehousing -- two of the major areas that the incentives targeted.
  • MEGA caused a temporary shift to higher construction employment without increasing overall employment, and created only one temporary construction job for every $123,000 in MEGA credits provided.
  • In regard to these construction jobs, 75 percent disappeared after one year, and the remaining 25 percent were gone in two years.

Source: Rob Capehart, "Study Discloses Failure of Tax Incentives," State Journal, May 17, 2007.

 

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