The debate over future economic development in Lansing continues with far-reaching implications for business — a conversation lawmakers and Gov. Gretchen Whitmer publicly said they expected to address before the end of the year, after passing the state budget.
The Detroit Regional Chamber continues to meet with and provide input to the leadership of both legislative chambers and the Governor’s office.
Where the issue stands: The leading economic development concept being discussed is a payroll tax credit. The House Republicans and Senate Democrats have each introduced their own versions. The basis of their proposals stem from the “Good Jobs for Michigan” package passed under then-Gov. Rick Snyder, but which has since expired.
As talks continue, the size and scope of both the House and Senate proposals remain in question and may not include a focus on large-scale projects like previous business incentives, such as the Strategic Outreach and Attraction Reserve (SOAR) Fund.
Why it matters: Global competition is ramping up with the onset of AI, digitalization, and automation, which are reshaping every industry. Site selectors analyze many factors when determining where to locate their next expansion, including the business climate, talent pool, and economic development incentives. With the expiration of SOAR at the end of 2025, Michigan needs to look at new forms of long-term, sustainable economic development incentives to compete for jobs and investment from other states and countries.
What it is: The Senate Democrats’ version of this payroll tax credit, called “More Jobs for Michigan” and introduced by Sen. Sam Singh (D-East Lansing), creates a withholding tax capture that diverts 100% of employee income taxes to the employer. Additionally, it offers a retention credit for jobs that were at risk of leaving if the employer had not made the investment in the state.
How it works: To qualify for the credit, the employer must be generating 25 or more jobs and must be at 175% of the Detroit Region’s median wage, or have 250 or more jobs at 150%. Currently, 175% of the Region’s wage is about $90,000, and 150% is about $77,000. This package selects jobs that it would qualify as “good jobs,” preferring white-collar jobs in engineering and semiconductors over blue-collar assembly line work.
What they’re saying: “The focus is on looking at high-paying e-jobs and what we can do to incentivize those,” Singh said. “My package also takes a look at how you retain jobs, and especially in this environment with the tariffs and so forth. Having a retention strategy for companies that are based here in Michigan makes a lot of sense to me.”
The Senate version offers a targeted approach to economic development that would benefit companies making the largest investments in the state, while also helping retain those already established. With the elimination of SOAR, and the reductions in other economic development programming in the state, this program will help with a limited backfill some of the burden left on the state, allowing the state to still compete for some transformational projects. However, 175% of the Region’s median wage can be quite high, especially for Michigan’s legacy companies. The Chamber has been in favor of including total compensation in this calculation, which includes the costs of healthcare plans and childcare reimbursements as part of the $90,000.
What it is: A payroll tax credit called “Real Jobs for Michigan,” introduced by Rep. Mike Hoadley (R-Au Gres), creates a new income tax capture program for companies that create new full-time jobs paying 150% of the regional median wage, which is about $77,000 in the Detroit Region, the highest in the state, and as low as $63,000 in the Northeast Region.
How it works: The program is capped at $50 million annually through 2036, with $10 million allocated for businesses with fewer than 100 employees, $15 million allocated for businesses with between 100 and 999 employees, and $25 million allocated for businesses with more than 1,000 employees.
What they’re saying: “The biggest benefit to this is it’s not corporate welfare,” Hoadley said. “It’s not upfront taxpayer money. It is sincerely performance incentives that go right to job creators in this state.”
While re-evaluation of economic development tools is necessary, the state needs to properly incentivize business and economic growth while honoring existing contracts. Additionally, the state budget halted a $500 million investment in the SOAR Fund. In contrast, this package caps spending at $50 million, leaving a $450 million economic development gap from where the state was just a year ago. Other states are ramping up their incentive and attraction programs, not slashing their budget by 90%.
What it is: The House Republicans’ legislation aims to refinance the state’s remaining $1.62 billion MEGA obligation by extending the payment schedule from five years to ten years. The House package repeals the Michigan Business Tax (MBT) and eliminates the MEGA tax credits, which were negotiated with previous Governors and the state’s largest employers to retain critical employment numbers in the state.
Why it matters: MEGA credits have been utilized during critical periods in Michigan’s economy, notably at the end of the 20th century and during the Great Recession, when companies were considering relocating out of Michigan or offshore. Those businesses that negotiated their MEGA credits made a commitment to the state that they would retain those jobs for Michiganders in exchange for the incentive.
What they’re saying: “We’re not walking away from the [MEGA] commitment,” Rep. Mark Tisdel (R-Rochester Hills), the cosponsor of the legislation, said. “We’re simply going to restructure that and try to get that out in 10 payments over the next 10 years.”
The Chamber views this restructuring of the contract as a deterrent to doing business in Michigan. Aside from legal questions, this hurts the state’s credibility in fulfilling its commitments, even when the employer has met and exceeded its obligations. Businesses invest in terms of decades, not in terms of the next election, and Michigan’s economic development policy needs to reflect that approach.
What it is: Transformational brownfield plans are sales and use tax exemptions for developers of transformational projects on sites that would otherwise never have been redeveloped. The incentives are based on the project’s outcome and provide no upfront funding to developers.
Why it matters: Transformational brownfields have been around since 2017 and were essential in building Hudson’s Detroit. Without a level of incentive for redeveloping sites, vacant and polluted sites would remain undeveloped and leave urban cores with visible stains. The statewide cap was originally set at $800 million and then raised to $1.6 billion in 2023. The cap is $30 million away from being hit again, but multiple projects are being proposed, including the revitalization and partial demolition of the Renaissance Center property, which will easily exceed this.
What they’re saying: “This is a program that helped take our city from bankruptcy to a Top 50 place to visit in the world, and is enabling the same kind of transformation from west to east,” said Jared Fleisher, incoming Chief Executive Officer of Bedrock.
Brownfield redevelopment tax credit has been an effective tool across the state to spur development and make productive and environmentally responsible use of underutilized land. In the Detroit Region, it is essential to redevelop signature yet outdated sites, such as the Renaissance Center and Lakeside Mall in Sterling Heights. The state must increase the cap to present more opportunities for the Region’s attraction of private investment and continue its momentum.
The latest: The Michigan Economic Development Corporation (MEDC) has been the center of attention from both Republicans and Democrats, with questions arising about transparency in its process, its achievements, and the general public’s opposition to government investments in private companies. The House Republicans have introduced legislation to disband the MEDC, which Whitmer has promised to veto if it were ever to clear the Democratic-controlled Senate.
Why it matters: The MEDC is the chief statewide entity charged with promoting economic growth in Michigan and does essential work to attract and retain businesses as well as promote the state and tourism.
The MEDC has been a good Chamber partner over the years, and it is critical that Michigan not unilaterally disarm in the hyper-competitive environment of creating 21st-century jobs for Michiganders. The Chamber is pleased to work with like-minded organizations, such as Business Leaders for Michigan, in reforming the state’s economic development approach and tools for the current global economy.