GOP economic development bills would reward only real job creation – Michigan House Republicans

Report on Proposed Economic Development Legislation in Michigan

Introduction: A Strategic Shift Towards Sustainable Economic Growth

A new legislative package, titled “Real Jobs for Michigan,” has been introduced by Michigan House Republicans to reform the state’s approach to economic development. The proposal marks a significant departure from traditional models that rely on large, upfront corporate subsidies. Instead, it introduces a performance-based incentive system designed to reward the actual creation of jobs, directly aligning with the principles of Sustainable Development Goal 8 (SDG 8): Decent Work and Economic Growth. The legislation, sponsored by State Representatives Mike Hoadley and Mark Tisdel, aims to create a more accountable and effective framework for fostering economic prosperity.

Alignment with Sustainable Development Goals

Fostering Decent Work and Economic Growth (SDG 8)

The core of the “Real Jobs for Michigan” plan is its direct contribution to SDG 8 by promoting full and productive employment and decent work for all. The legislation moves away from speculative incentives towards a system that rewards tangible outcomes.

1. Performance-Based Incentives: Companies only receive benefits after creating and sustaining new jobs, ensuring that public resources directly support economic growth and employment.
2. Promotion of Decent Work: To qualify, a new job must be full-time (at least 35 hours per week) and pay a salary of at least 150% of the area’s median hourly wage. This requirement directly supports Target 8.5 of the SDGs, which calls for decent work for all women and men.
3. Sustainable Job Creation: The incentive, which allows companies to retain a portion of state income tax withholdings for a 10-year period, encourages long-term employment rather than temporary hiring surges.

Enhancing Inclusivity and Reducing Inequalities (SDG 10)

Unlike previous economic development programs that often favored large corporations, this proposal is structured to be inclusive of small and medium-sized enterprises (SMEs), a key component of SDG 10: Reduced Inequalities. By lowering the barrier to entry, the plan fosters a more equitable economic environment.

• Accessibility for Small Businesses: The incentive system is activated with the creation of a single new job, allowing small businesses to participate and grow.
• Tiered Funding Allocation: The legislation includes a $50 million cap on available tax breaks, specifically allocated across different-sized companies to ensure SMEs receive a dedicated portion of the funds.

Key Mechanics of the “Real Jobs for Michigan” Proposal

Incentive Structure and Eligibility

The mechanism is designed for simplicity and direct impact on a company’s labor costs.

1. Tax Withholding Capture: A qualifying company can retain 50% of the state income tax withholdings for each new employee hired. This equates to 2.125% of the new employee’s salary.
2. Aggregate Headcount: The number of “new jobs” is determined by the net increase in a company’s total employee headcount, preventing companies from replacing existing workers to gain the incentive.
3. Funding Tiers: The $50 million cap is distributed as follows:
   • $10 million for companies with fewer than 100 employees.
   • $15 million for companies with 100 to 999 employees.
   • $25 million for companies with 1,000 or more employees.

Transition from Legacy Programs

The legislative package also addresses the conclusion of the Michigan Economic Growth Authority (MEGA) tax credit program, aligning with SDG 16: Peace, Justice and Strong Institutions by creating more transparent and streamlined economic policies.

• Phasing Out MEGA Credits: The legislation formally ends the defunct MEGA credit system.
• Managing Existing Credits: Companies with remaining, certified MEGA credits can continue to claim them over a 10-year period, provided they maintain at least 95% of their current full-time employee count.

The proposed bills, House Bills 5292 and 5293, have been referred to the House Finance Committee for review.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

The article on Michigan’s proposed economic development legislation connects to several Sustainable Development Goals (SDGs) by focusing on job creation, economic growth, and inclusivity for businesses of all sizes.

• SDG 8: Decent Work and Economic Growth: This is the most prominent SDG addressed. The entire article revolves around a new legislative plan, “Real Jobs for Michigan,” designed to stimulate economic growth by incentivizing the creation of “new, good-paying jobs.” The policy aims to promote full and productive employment.
• SDG 9: Industry, Innovation and Infrastructure: The legislation supports industrial and business growth by providing financial incentives (tax breaks) to companies. It particularly encourages the growth of small-scale enterprises by making the incentive accessible even for the creation of a single new job, thereby fostering a more resilient and inclusive industrial base.
• SDG 10: Reduced Inequalities: The plan aims to reduce economic inequalities by ensuring new jobs are well-paid (“at least 150% of the area’s median hourly wage”) and by making the incentives available to small businesses, not just large corporations. The article notes, “small businesses get to participate,” which contrasts with older systems that often favored larger companies.
• SDG 1: No Poverty: By promoting the creation of high-wage jobs, the policy directly addresses poverty reduction. A job paying significantly above the median wage provides a stable income that can lift individuals and families out of poverty.

2. What specific targets under those SDGs can be identified based on the article’s content?

Several specific SDG targets can be identified from the details of the proposed legislation.

1. Target 8.3: “Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises…”
   • The “Real Jobs for Michigan” plan is a development-oriented policy directly aimed at “decent job creation.” It explicitly supports small and medium-sized enterprises by having separate funding tiers, including “$10 million is available for companies smaller than 100 employees.” The article emphasizes, “This reward system kicks in starting with the very first new job created.”
2. Target 8.5: “By 2030, achieve full and productive employment and decent work for all…”
   • The policy focuses on creating “full-time” jobs, defined as at least 35 hours per week. The requirement for these jobs to pay “at least 150% of the area’s median hourly wage” directly aligns with the goal of achieving “decent work.”
3. Target 9.3: “Increase the access of small-scale industrial and other enterprises… to financial services…”
   • The tax withholding capture mechanism acts as a financial incentive, increasing the access of small businesses to financial benefits that reduce labor costs. The article states the plan “includes incentives for small businesses; even a company that hires a single new employee is eligible.”
4. Target 10.2: “By 2030, empower and promote the social, economic and political inclusion of all…”
   • By designing a system where “companies of all sizes get rewarded,” the legislation promotes the economic inclusion of small and medium-sized businesses that were often excluded from previous incentive programs with high job creation thresholds.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

Yes, the article contains several explicit and implied indicators that can be used to measure the success of the policy and progress towards the SDG targets.

• Number of new jobs created: This is a direct indicator for Target 8.3 and 8.5. The article explicitly mentions a potential outcome: “the businesses will have created between 30,000 and 40,000 new jobs.” The policy’s design is based on a company’s “aggregate headcount,” providing a clear metric for measurement.
• Wage level of new jobs: This indicator measures the “decent work” aspect of Target 8.5. The article specifies that a qualifying job must have a salary of “at least 150% of the area’s median hourly wage.” Progress can be measured by tracking the wages of the jobs created under this program.
• Number and size of participating companies: This indicator relates to Target 8.3 and 9.3. The legislation includes three distinct tiers for businesses based on employee count (under 100, 100-999, and 1,000+). Tracking the number of companies in each tier that utilize the incentive would measure the program’s reach, especially its success in engaging small and medium-sized enterprises.
• Total value of tax incentives claimed: This is a financial indicator. The article mentions a “$50 million cap on the amount of tax breaks available,” spread across the three tiers. Measuring how much of this cap is utilized would indicate the level of job creation and economic activity spurred by the program.

4. Summary Table of SDGs, Targets, and Indicators

Source: gophouse.org