In December 2021, Michigan Democratic Governor Gretchen Whitmer signed legislation establishing the Strategic Outreach and Attraction Reserve (SOAR) program – “a billion dollar economic development fund to ensure the state can compete for billions of dollars in investment and attract tens of thousands of jobs to support our economy,” according to the press release. Michigan Legislature distributed a first billion dollars for the program. SOAR grants would be paid to companies that have invested in the state or state-affiliated entities for the benefit of those companies; all transfers would require approval of the state Senate Appropriations Committee first and then of the entire legislature.
In practice, SOAR is only further contributing to a growing corporate welfare trend, in which states are giving huge sums of taxpayer money to private companies. Michigan’s example should prove to taxpayers and state governments that only private companies should bear the costs of their own development projects.
According to a spreadsheet provided to Raison by the Michigan Department of Technology, Management, and Budget, the state has allocated $2.166 billion to SOAR since March 2022. Of that amount, it has approved more than $1.4 billion for disbursement. Every expense so far has benefited a company making electric vehicles (EVs), EV batteries, or related battery components.
The state spent over 75% of its initial SOAR infusion in seven months for just two transactions: $666.1 million to General Motors (GM) and $100.8 million at Ford. Every disbursement has arrived answer to this company commitment to update or expand its manufacturing footprint in Michigan.
In April 2023, the State allowed An additional $585 million in grants: $210 million to Ford for a battery factory, $200 million to battery maker Our Next Energy, and $175 million to Gotion, Inc., for an EV battery component factory.
These incentives are apparently meant to pay off in the long run: by attracting businesses to your state, you create well-paying jobs and promote economic development down the line. But there is more and more evidence that these deals are a bad deal for the states that make them, spending hundreds of millions or billions of dollars to “create or maintain” a few thousand jobs here and there. Corporate wellness just doesn’t work, especially not as its proponents claim.
Even the numbers cited by Michigan are not impressive. For example, while Gotion promised spending $2.36 billion on its factory, Michigan incentives have so far eclipse $800 million, which means state taxpayers fund a quarter of the entire project.
While the company promises to create 2,350 jobs, the state’s contribution to the project breaks down to more than $340,000 per job. For the same amount, Michigan could pay each of these 2,350 employees salaries for almost six years.
GM has engaged invest at least $7 billion in the state across four sites and create or “retain” 5,000 jobs. But state and local governments have so far kicked off $824 million in incentives and $666 million in SOAR funding, plus a $936 million a pause on utility rates – a total investment of $2.426 billion in direct subsidies or lost revenue, more than a third of GM’s pledged total investment. Each of those jobs will cost Michiganians more than $485,000.
Our next energy promises that his plant will create 2,112 jobs, in exchange for $200 million in public money – a relatively paltry public expenditure of just under $95,000 per job. In particular, this company raised $300 million in venture capital in February to help fund its Michigan plant.
Eventually, This The method of financing projects is far superior: companies valued at billions of dollars would have to bear the burden of financing their own development projects. Let them take the risks and, if they succeed, reap the rewards, on their own.
State governments can play a role in this process, but not by handing out money to privileged companies. Rather, they should strive to make their states more welcoming to all companies, perhaps by simplifying their tax structure or modernizing their infrastructure. Corporate welfare simply distorts the market, rewards politically connected corporations, and wastes tons of taxpayer dollars.