State Bill of the Month — November 2023: Michigan HB 5136

TPA’s State Bill of the Month for November 2023 is Michigan’s HB 5136, an act relating to economic development and auditing tax subsidy projects that would identify and return unused funds back to the general fund or for SOAR projects. This legislation would eliminate the Strategic Outreach and Attraction Reserve (SOAR) Fund. Economic development incentives have run rampant in the State of Michigan, and they need to be reined in.

Background:

The SOAR Fund was created in 2021 to encourage investment in Michigan’s economy. Since the creation of SOAR, two billion dollars has been allocated and the program is slated to receive even more money because of a corporate income tax designation.^[1] House Bill 5136 would require an annual audit of the SOAR fund, an important step to increase accountability and transparency on behalf of taxpayers.

TPA opposes targeted incentive projects in any way, shape or form. Economic incentives and economic incentive funds like SOAR use taxpayer money to encourage private companies to invest in communities. This is corporate welfare, and the practice of giving taxpayer money or narrowly-targeted tax breaks to private companies outside of necessary government procurement activities is against the principles of a free market economy.

HB 5136 is now in the Michigan’s House Committee on Appropriations.

Michigan legislators are fighting to reduce taxpayer waste and abuse by reigning in economic development projects. Passing legislation that would require an annual audit is a great first step. However, the best economic incentive fund for taxpayers is no economic incentive fund. The way to encourage business investment is stable and affordable tax and regulatory regimes. Michigan legislators should work to completely eliminate the SOAR fund.  

HB 5136:

As part of a three-pronged bill package, HB 5136 would require an annual audit on the economic incentive SOAR fund. If the auditor general finds that some of the SOAR money promised needs to be taken back, the state would enforce a strategic claw back or specific repayment provision, which would then return that money to the general fund. The auditor would enforce a repayment provision or claw back if any money allocated to a SOAR program was unspent or unallocated at the end of the fiscal year and if a SOAR project was cancelled or placed on hold, among others.

This is why TPA is proud to make HB 5136, introduced by State Rep. Ann Bollin (MI-49), alongside fourteen cosponsors in the Michigan House of Representatives, its Bill of the Month for November 2023.

^[1] https://taxfoundation.org/blog/state-tax-incentives-costs/