During a presentation to the House Tax Policy Committee
this week, Michigan Economic Development Corporation (MEDC) officials more than
tripled the estimated fiscal impact of committed tax credits available through
2031. The credits, granted by the former Michigan Economic Growth Authority
(MEGA) have been a hot topic in Lansing since late last year. The credits have
been designated as the cause of projected budget deficits for the current
2014-2015 fiscal year and the upcoming 2015-2016 fiscal year.
In December, the MEDC and the Department of Treasury
estimated the total liability to be approximately $3 billion through 2031 when
the credits would run out. Those projections were based on an assumed 35 to 50 percent
of credits being awarded. When projecting based on 100 percent of full value,
the number rises to $9.38 billion.
The state will spend between $500 and $600 million per
year until 2030, according to the MEDC, ending with $129 million in 2030 and
$133 million in 2031. No new credits are being awarded under the Michigan
Corporate Income Tax, which took effect in 2012.
To address the issue, MEDC President Steve Arwood told
the House panel that corporations utilizing the credits will be asked to
provide an annual three-year credit projection and that the consensus revenue
estimating processes will now include total credit liability estimates.