The State of Michigan always seems to find its way to the top of lists
we all wish didn’t exist. Lately it is the national unemployment list
driven largely by the meltdown of the domestic car business. In an
effort to try and staunch the bloodletting, Michigan has spent
considerable dollars to incentivize businesses to build jobs here in
Michigan.
ICON began looking at the State of Michigan’s
MEGA tax credit for
high-tech jobs in late 2007. The program isn’t widely advertised, but
regional and local business publications almost always pick up reports
once the credits are issued, representing the best way for companies to
compare themselves with those issued tax credits and decide if they
should apply.
Few companies are forecasting major growth plans now compared to this
time two years ago, but those who are recognize that Michigan’s
Business Tax is a big impediment, so much so that outsourcing or hiring
contract employees often is a better option. ICON faced that dilemma,
knowing that it would have to continue to staff up through 2009 to meet
growing demand, and the tax credit seemed like a good option to take
the pressure off of full-time employee commitments.
The process began with
Ann Arbor Spark who reviewed our business plan
and our model for growth over the next five years. From there,
representatives from the
Michigan Economic Development Council (MEDC)
also interviewed the company principles, and ultimately approved the
application.
Key factors in having the application approved were the ability to
demonstrate a strong business plan and then graft that plan into the
structure that allows MEDC to make an overall assessment. The tax
incentive program was originally designed to instigate more
manufacturing jobs and as a result, the application and the review
process have a corollary focus: wages and capital equipment investments
are chief concerns rather than salaries and benefits.
But once the case is made, and the MEDC approves the application, a
formal approval process takes place in Lansing, and tax credits are put
in place. The good news for businesses just starting the process: the
program doesn’t start until you are ready. So if the first year doesn’t
meet the minimum expectations, the program can begin a year later.
ICON hit its target growth for 2009, and the tax credits definitely
played a roll in our decision-making process. In some cases, where
contractors or out-of-state developers were available, we chose instead
to hire on full time, in part to meet our targets and qualify for the
credit. In the end, the fiscal offset probably doesn’t net ICON a
significant return, but full time employees almost always prove to be
more effective than outside help. These days in particular, people
hired on full time with benefits see themselves as extremely fortunate.
There is mounting pressure to cancel these types of tax credits and
other incentives to drive up employment here in Michigan. Those who
advocate eliminating these incentives must have solid jobs or trust
funds and certainly aren’t in the business of running a business.
Employers here are finding any edge they can to cut costs, and with
labor representing the biggest expenditure for most companies, it is
the easiest place to look.
If Michigan doesn’t find innovative ways to
reconstitute its job base, we can look forward to many more years of
being…number one.