To keep corporate welfare alive, money is diverted from schools, highways and public safety.

Senate Bills 981, 982 and 983, introduced by a bipartisan group of senators last month, would establish a revolving fund mechanism under the Strategic Outreach and Retention (SOAR) program to pay for future specific incentives to the company.

Income taxes paid by newly generated and retained GM workers in Lake Orion and Delta Township would be taxed the same as yours and mine under the SOAR incentive structure established last year . The majority of the money would go to the state’s general fund, with some going to the Michigan School Aid Fund.

This batch of invoices contains a multitude of problems, the most serious of which are:

Senate Bills 981-983, on the other hand, would add a tax capture mechanism to SOAR. Companies that were granted SOAR incentives would have their new/retained worker income taxes – as well as workers involved in facility development – ​​redirected to the SOAR fund to be used for future incentive packages. This deferral would last until workers’ income taxes generated 105% of the critical industry incentive the company had received.

This point can be gleaned quickly from the wording of the bill. It is less clear, at first glance, how long it might take for the tax capture requirement of these transactions to end, so that the SOAR fund would be replenished and the Michigan public would begin to benefit from the incentives.

For the deal with GM, that threshold would be $630 million. The tax capture would divert $480 million from the general fund and $150 million from the school aid fund.

Attached is a document illustrating two different scenarios. The first two pages show tax capture totals based on what GM is doing in Delta Township. The first assumes the minimum creation of 3,200 jobs, and the second shows the promised creation of “up to” 4,000 jobs. The third page is a breakdown of the contribution from the Lake Orion project, for which up to 1,000 jobs are up for grabs. The last two pages are about Delta Township’s contribution based on the condition sheet minimum and the “up to” pledge.

On each tab, the average salary for each facility is taken from the board record of the Michigan Strategic Fund’s Jan. 25 board meeting at which the Fund asked the legislature to fund GM’s incentives. . We assume annual cost of living adjustments of 3%. Since we don’t have data on salaries or the hiring schedule for the construction work, we are generous and give them the same amount as if the factory was fully open and staffed in the first year.

Assuming 2022 is the first year, by 2030 (when GM’s agreement with the state expires), the amount of income tax recouped between the Lake Orion and Delta Township plants combined would be between $88.9 million and $105.1 million. Remember that GM received a total of $666.1 million from its SOAR incentives. The next request for SOAR funds to pursue electric vehicle and semiconductor manufacturing projects is expected in the coming weeks, with request estimates of up to $2.5 billion. Even if the Senate bills were to pass, the funds for those projects — and likely any other incentive deals this decade — would have to come from the General Fund.

Additionally, the General Fund and School Aid Fund will not receive their first penny of income tax from these new and retained GM jobs until 2057 at the earliest. Michigan’s incentive agreement with GM expires at the end of 2030…unless GM invokes its early termination clause six months after creating 3,200 new jobs in Delta Township. Automakers are making very optimistic projections about consumer acceptance of electric vehicles and the ability of their supply chains to deliver exponentially larger supplies of rare-earth materials needed for electric vehicle batteries. If Senate Bills 981-983 were to pass and the auto industry projections don’t hold up, it’s highly plausible that all income taxes generated by SOARs would only be paid to other big business…while the schools, roads, and public safety that Michigan families depend on and Main Street businesses never see a penny of.

Summary of news:

  • To keep corporate welfare alive, money is diverted from schools, highways and public safety.
  • Check out all the news and articles from the latest business news updates.

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