State government business grants are impractical and lawmakers should stop offering them. They are ineffective in growing the economy, unfair to businesses that do not get them, and costly to the state budget. This is one of the reasons we maintain a dashboard on how lawmakers vote on business subsidy programs.
However, there is a more basic reason why we pay special attention to these laws. They promote things that are outside the proper role of government. And for some time in history, public spending could not be used to encourage private business.
In the early days of the Michigan state government – and the governments of many other states – elected officials attempted to spur economic growth and disaster ensued. Some states have failed to pay their creditors and others have lost substantial sums in support of private railways, canals and other spending projects known as “internal improvements.” Voters, in response to wasting their tax dollars, added provisions to the state constitution to remove the state from direct economic incentive activity.
Additionally, courts across the country have gotten involved in politics and have ruled that taxes can only be spent for public purposes and not for anyone’s private benefit. As Michigan Supreme Court Justice Thomas Cooley said in his ruling on the matter, “The state cannot have any favorites. Its job is to protect industry for everyone and to ensure that everyone benefits from equal laws. It cannot force a reluctant minority to submit to tax in order to be able to keep on its feet any business that cannot be autonomous. “
These state constitutional rules and doctrines are the reason why late 19th-century America is known to be the era when the country lived up to its ideals of free enterprise. The government set the rules – property rights, contract law, fraud laws and the like – and stepped aside as private interests used their resources and ingenuity, improving economic outcomes nationwide.
Much has changed since then. The powerful confuse their private interests with public interests and convince lawmakers to comply with these principles. Court decisions are ignored. Constitutional rules are interpreted in an irrelevant way.
Even so, it remains a central question regarding the role of government: it should not engage in the granting of favors to selected companies. And since grants shouldn’t be the government’s business, the Mackinac Center has developed a dashboard that shows how lawmakers are voting on the issue.
The dashboard uses our Michigan Votes database, which provides plain language descriptions of every bill presented to the state legislature since 2001, as well as a record of how lawmakers have voted. on bills. To be included in the scorecard, a bill must authorize transfers from some taxpayers to others, whether through grants, loans, refundable tax credits and other aids where beneficiaries can receive payments from the public treasury. The dashboard does not include invoices that allow selective tax exemptions or other aids, but do not transfer money from some taxpayers to others. A full statement of the methods used to determine if invoices are included in the dashboard can be found here.
The dashboard shows a number of interesting trends. There were spikes in business grant authorizations during the 2003-04 and 2007-08 legislatures, which approved more than $ 4 billion in new spending each. The finalist was 2017-18, when lawmakers approved new grant programs for developers and businesses. The scoreboard also shows that business subsidies generally received unanimous legislative support. In recent years, however, lawmakers have approved far fewer grants, and those that were approved were more likely to face bipartisan opposition.
We built the dashboard in 2018, and a number of new invoices have been added to it as they are approved. As lawmakers approve new laws, we’ll add those that meet the scorecard criteria.
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