Caterpillar and Jimmy John's may leave Illinois. Should Michigan recruit them?
In the aftermath of Illinois' decision to raise business taxes and income taxes, at least two major companies — construction equipment manufacturer Caterpillar and sandwich shop chain Jimmy John's — reportedly threatened to move their headquarters out of Illinois.
Should Michigan try to recruit them?
Michael Finney, CEO of the Michigan Economic Development Corp., says no.
Michigan Economic Development Corp. CEO Michael Finney
Ryan J. Stanton | AnnArbor.com
He concluded: "The likelihood that that will result in success is virtually zero because every other state and every other economic developer is going to go do the same thing."
In the end, Finney says, "What the state of Illinois is going to do is they're going to create some kind of customized incentive to keep those companies there."
And we'll be left staring at Caterpillar's Feller Bunches and Jimmy John's Bootlegger Club and wondering what could have been.
Finney, former CEO of Ann Arbor SPARK, said the typical economic development strategy of "hunting" for companies is flawed. He said a simpler and lower overall business tax rate — which Gov. Rick Snyder has pitched as part of his budget proposal — is a more effective strategy of boosting the economy because it benefits all companies.
Among the many criticisms of Snyder's budget is that the decision to slash most of the state's business tax credits would disarm Michigan in the economic development race to lure expanding companies.
One of the key sectors that has benefited from Michigan's previous tax incentive strategy is the battery industry. Companies like Johnson Controls, Dow Chemical, A123Systems and LG Chem are all involved in projects to construct battery plants inside the state's borders and hire thousands of workers.
Would those battery companies have picked Michigan for their expansions without the hundreds of millions in tax incentives the state handed out?Hard to say. Perhaps they would have located here because of Michigan's strong manufacturing base and proximity to the auto companies that are pursuing the electric vehicles that use lithium-ion batteries.
Or maybe they would have picked other states, choosing to chase the best tax incentive package.
Regardless, Finney believes that maintaining an "extreme level" of incentives — such as that Michigan previously favored — is not sustainable.
Instead, Snyder has proposed a capped pool of $75 million in annual incentives — including $25 million for the film industry, which has vociferously opposed Snyder's proposal.
Finney said MEDC would use that capped pool of incentives to be "opportunistic." But, in general, he said MEDC is focusing more on building programs to provide grassroots services to entrepreneurs, attracting talent to return to Michigan and providing resources to Michigan's existing companies.
"We will chase companies where it's strategically important," he said.
Nonetheless, he decries the "one-upsmanship" that defines the U.S. economic development game, in which states compete to offer the most aggressive tax incentives in an accelerating race to the bottom.
"Everybody seems to be doing the same thing," Finney said, though "it is effective in some instances."
But, he added, "I don't consider that terribly innovative."
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
LarryJ
Fri, May 20, 2011 : 1:01 a.m.
The states should agree to a pact NOT to offer special incentives to lure corporations. We all lose from such a bidding war. If the states should not agree on this, the feds should prevent it.
Tru2Blu76
Sun, Apr 24, 2011 : 1:16 a.m.
I heartily agree with nemo: this ridiculous "competition" to bribe companies is a two-way scam perpetrated against the citizens of ALL the states. Yeah - annarbor.com should have put a "Neither" vote button in their superficial survey. The answer is to create a model taxation law - to be followed by every state. There should never be a significant difference in the tax systems from state to state. There's no logic to it. There is no reason to "bite" on this phony "invitation" from corporate interests to have a competition to see which state pays them the biggest bribes. This, by the way, says a lot about the "honest capitalists and entrepreneurs" who are always telling us what's good for the economy AND how "qualified" they are to be running our state and federal governments. All American businesses should be required to sign an oath of loyalty: to the United States of America and to their customers and the American people. Any company caught participating in the solicitation of bribes like this "tax abatement" scam should be liquidated immediately and auctioned off to ONLY those bidders which have signed a loyalty oath. Snyder's proposal is a joke: nothing but a cloaked process to reward companies the Republicans "like." They don't like movie makers - we knew that all along. I urge the Michigan Board of Elections to expedite approval of the Snyder Recall petition. Snyder is a rattlesnake loose in our own living rooms. Anyone interested in seeing a simple breakdown of the so-called budget issues (both federal and state) should take a look at this video: <a href="http://www.youtube.com/watch?v=sZ9hVMN8UMY" rel='nofollow'>http://www.youtube.com/watch?v=sZ9hVMN8UMY</a>
Diagenes
Sat, Apr 23, 2011 : 9:09 p.m.
Government should not be in the business of picking corporate winners and losers. Tax laws and regulations should not be manipulated to attract favored companies. A healthy business climate will attract business. Companies will move to places like South Carolina and Indiana because it is in their best interest in the long run. Michigan will be succesful in attracting and keeping companies here when the government demonstrates it will create a climate where business can succeed.
omniskeptic
Sat, Apr 23, 2011 : 7:39 p.m.
So ... two corporations who are holding a gun to their headquarters' states' heads and saying "no tax increases or we're outta here." Sounds like the kind of companies we really need up here. Team players and all ...
clownfish
Sat, Apr 23, 2011 : 1:23 p.m.
Sigh, after reading these comments it has become obvious that if Max Fischer, the Fords, Fred Meijer, Ronda Stryker, Mike ilitch and others did not have to deal with unions and other lazy "lefties" then they could have become wealthy. Instead they have to struggle to pay their taxes. Poor folks!
debling
Sat, Apr 23, 2011 : 1:19 p.m.
Hardly a month goes by after Governor Snyder pushes for "fairness" in taxation and we are talking about corporate welfare again. To be clear, all States should encourage businesses to relocate to their State. However, taxpayers should never be asked to subsidize this by giving tax grants or other incentives. This is an example of socializing the costs and privatizing the profits of business. Remember, every tax dollar given to a private business through an incentive is a tax dollar you must pay out of your pocket. If you don't mind that, don't complain about high taxes.
Mr. Tibbs
Sat, Apr 23, 2011 : 12:45 p.m.
A no win for anyone. republican or democrat, two sides of the proverbial dirty coin. no matter who wins, politically....we the people still loose. Flat tax. a flat tax is the only way I will feel that every one is paying thier way. Trump and Gates will still be uber wealthy and I don't care if my taxes do go up. as they say. I just want a job!
genetracy
Sat, Apr 23, 2011 : 1:55 a.m.
Jobs provided by evil corporations? Who needs them? Recruiting Catepiller and JJ's will ruin Michigan's reputation as a federal aid themepark. Besides neither corporation subscribes to the union matra of "more pay, less work".
wereintroubl
Sat, Apr 23, 2011 : 1:35 a.m.
"MEDC is focusing more on building programs to provide grassroots services to entrepreneurs, attracting talent to return to Michigan" Good luck with that. A former Michiganian that is successful in another state is unlikely to return- even with lower taxes. As a businessperson, the costs of taxes are rolled into the price of the product. If a former Michigan is making money is a state that has say an 8 percent tax rate, they are not going to pick up an move for an extra 2 percent in their income. Also, I have news for Mr. Finney: there are 49 other states that have programs to have entreprenuers as well. Like it or don't like it, I do not care how low taxes are: incentives have to be offered to be competitive. John Engler leanred this the hard way in the early days of his governorship, and it looks like Snyder will do the same thing.
macjont
Fri, Apr 22, 2011 : 11:47 p.m.
The further we get from 1787, the more we see the flaws in the federal system the founders created. Understanding that they had little choice if they wanted to cobble together a nation out of self-perceived independent states, we should not ignore the weaknesses of the system. Like slavery, the federal system created was a compromise and not one without soft spots.
katie
Fri, Apr 22, 2011 : 11:35 p.m.
What a ridiculous poll! Really, these polls are quite slanted. How about "none of the above"?
Vernon
Fri, Apr 22, 2011 : 10:19 p.m.
I would guess that offshore is looking good if it means a move, American loyalty is not important to international corporations it's all about the Benjimans......
Tru2Blu76
Sun, Apr 24, 2011 : 1:39 a.m.
I'm sure you remember the old gangster movies where some Mafia types go around the neighborhood and extort 'insurance money' from home and business owners. In those movies, the story is always the same: people are always frightened more than angered so they pay up. The Happy Ending comes when the law (usually federal agents) shows up. Does that sound familiar when you're thinking about the current situation with corporations going around the country "offering" the possibility of more jobs and a "better economy" - but ONLY if the states pay up. Well it should. That's the Extortion Racket. Why are none of these CEOs and BoDs slapped with extortion arrests? Simple: because these new mobsters are still playing the fear and panic card - and- they have all those Republicans in office promoting their extortion scam.
northside
Fri, Apr 22, 2011 : 9:21 p.m.
Just once I would like to hear a state official tell a corporation to go [this part would get the comment censored] and pay their fair share of taxes in the state where they're currently based. And if states said that on a regular basis? We wouldn't find ourselves in this position so often.
Tru2Blu76
Sun, Apr 24, 2011 : 1:25 a.m.
You're absolutely right: but the "story" telling states it's "wiser" to compete by paying bribes to companies has already caught everyone with their guard down. Naturally: all "business interests" (large and small) are "for" this because it's FREE MONEY, money they'll never have to pay taxes on. Notice that this is a fear based argument: "If you don't bribe us and don't let us set our own terms, we'll move to another state where the government and workers will bow to our importance." That - is clearly extortion. There's no other word for it - and it should be prohibited as such.
Jay Thomas
Fri, Apr 22, 2011 : 9:16 p.m.
Illinois is a terrible state to do business in and yet Kmart pulled up its roots and moved the company HQ there just to get away from Michigan. We won't be getting either of those two businesses, that's for sure.
A2comments
Sat, Apr 23, 2011 : 1:08 p.m.
KMart, owned by Sears, closed a redundant headquarters... And cut staff to the bone. And watched their business shrink.
joe.blow
Fri, Apr 22, 2011 : 8:15 p.m.
What does Michigan have to offer? Higher taxes and a lot of liberals who already complain about too low of tax on rich cooperations. They should head to the Dakota's or Virginia.
clownfish
Sat, Apr 23, 2011 : 1:18 p.m.
" A lot of liberals" Yes, we saw that in the last election. And in the terms of John Engler (3), the election of Mike Cox, Terry Land etc. so easy to always blame the Other, isn't it?
genetracy
Fri, Apr 22, 2011 : 6:58 p.m.
Looks like Catepiller and Jimmy Johns cannot stand blue state nirvana.
pseudo
Fri, Apr 22, 2011 : 5:54 p.m.
oh baloney!! Caterpillar is never really going to leave Illinois. Way too much infrastructure. This is the is kind of baloney story that I dislike the most from this paper? Where did your lead come from ?
Macabre Sunset
Fri, Apr 22, 2011 : 9:09 p.m.
Probably posturing, but wow, did Illinois ever sock it to corporations - they have a huge unfunded pension/benefits issue, and since the recent election did not upset the blue majority, this is their answer. So there are tremendous opportunities here for the right companies. Hopefully the low rents and high unemployment will attract companies, as will a more consistent business tax structure.
joe golder
Fri, Apr 22, 2011 : 8:57 p.m.
I agree with you lorie. I believe they are posturing for big tax breaks from the state of Illinois. Many states and cities will roll out the carpet and spend a lot of money for nothing. I'm glad MI is smart enough not to engage in this non sense.
tommy_t
Fri, Apr 22, 2011 : 6:20 p.m.
you have nailed the essence of baloney. congrats.
Macabre Sunset
Fri, Apr 22, 2011 : 5:39 p.m.
Finney sounds more interested in making a partisan complaint than improving the business climate in Michigan. Snyder is trying to create a level playing field for businesses. That attracts a lot more small business in the long run - and small businesses employ more than half of Americans. Caterpillar is a long shot because it has had a lot of trouble with organized labor in the past. I would guess if it moves, it moves south.
quetzalcoatl
Fri, Apr 22, 2011 : 5:38 p.m.
Mr. Finney's stated rationale for doing nothing -- we don't need to tell potential employers what Michigan has to offer because we can count on them to find out for themselves -- is stunningly simple-minded. It does, however, offer a window of opportunity for the state's troubled budget. Make Mr. Finney and his "corporation" first on the chopping block. If Mr. Finney truly believes what he says, he has no job and is collecting a check under false pretenses. Likewise, all sales people should be fired, newspapers should be shut down, and universities are not necessary because we can all find out things for ourselves.
nemo
Fri, Apr 22, 2011 : 5:22 p.m.
Your survey is flawed. The missing question is "NO (period)" Companies should be here because they want to be here, not because we capitulate to blackmail. Want to make the state attractive to business? Fund the schools, and fix the roads and bridges for starters. Stop throwing cash at freeloader corporations.
Jojo B
Fri, Apr 22, 2011 : 4:58 p.m.
I love this quote: "The likelihood that that will result in success is virtually zero because every other state and every other economic developer is going to go do the same thing." By that logic, I'm going to stop looking for a job.
Do not taunt Happy Fun Ball
Fri, Apr 22, 2011 : 4:26 p.m.
I know a nice headquarters that hit the market recently, pretty nice, full of old books, and close to some of the smartest college graduates in the country. :) Great college football nearby.
Moscow On The Huron
Fri, Apr 22, 2011 : 4:23 p.m.
This question is most likely moot, because precedent has been set that prevents Caterpillar and Jimmy Johns from doing this. Boeing identified South Carolina as the best environment in which to build a factory, and has nearly completed it, but the Obama-appointed NLRB is now taking action to prohibit Boeing from assembling aircraft anywhere but in Washington state. Even if Caterpillar and Jimmy Johns determine Michigan to be the best environment for them, they could meet with the same tyrannical roadblock, especially since Illinois is the state they are moving from.
clownfish
Sat, Apr 23, 2011 : 1:44 p.m.
Boeing has assembly plants in: Washington Long Beach Ca St Louis MO Seal Beach Ca I believe they have helicopter assembly in Pennsylvania and Arizona. I am wondering MOSCOW, did you hear about this NLRB thing from the same outlet that told us about Obamas $2,000,000/day India trip, how he is using our tax dollars to promote Brazilian drilling in our Gulf and that Obama stopped ammunition production in order to facilitate his FEMA concentration camps, all the time he is not a citizen?
clownfish
Sat, Apr 23, 2011 : 1:15 p.m.
What exactly is the NLRB doing that would prohibit expansion in SC?
Alan Goldsmith
Fri, Apr 22, 2011 : 4:06 p.m.
Great-- our Finney story for today. Didn't he work at Ann Arbor Spark? Lol. "He concluded: "The likelihood that that will result in success is virtually zero because every other state and every other economic developer is going to go do the same thing."" So we have an official here who caves in and doesn't even bother fighting to bring jobs to Michigan. What a refreshing change and will help greatly in our raise to becoming Mississippi.
Huron74
Fri, Apr 22, 2011 : 3:57 p.m.
This is a no-win situation for the state's politicians. If they make deals to bring in companies from other states they get hammered for handing over "giveaways" to big-business. But if they don't play the game then it is declared that they don't care about attracting private sector jobs. A no-win except for hard core left-wing types who love employment but hate employers. Especially around election season.
tdw
Sat, Apr 23, 2011 : 11:17 a.m.
Amen brother well said