Data center tax breaks show rift over economic strategy

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LANSING, Mich. (AP) — A major Internet data center developer’s decision to expand into Michigan as long as it receives lucrative tax breaks is testing the economic development strategy of Gov. Rick Snyder, who has called them the “heroin drip of government.”

Lawmakers are rushing to ensure that Las Vegas-based Switch locates a mega-campus of computer servers near Grand Rapids.

The tax breaks would also apply to existing data centers.

Supporters say Michigan must compete with other states with specially tailored tax incentives for data centers.

But the budget ramifications concern opponents of the legislation, which has come under scrutiny for having no requirement that Switch meet minimum spending or hiring levels to qualify for the tax breaks.

Snyder says he wants assurances that the project “results in real jobs.”

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6 comments

  • Andrew

    “Supporters say Michigan must compete with other states with specially tailored tax incentives for data centers.”

    Yes, they say that. But they don’t back it up with any real solid data that indicates that it is the truth. There are other, better ways for MI to compete with other states. Ways which don’t come at the expense of the people who are still here in MI who need good jobs. Ways which don’t allow states to offer “new jobs” and then bring in their own people from out of state to fill those jobs. Ways that don’t siphon off even more money from education and infrastructure. And way which don’t continue to drive qualified workers out of the state in order to make more money doing the same jobs they do here. Do I have the perfect solution to all these problems? No. I don’t. But I know plenty of solutions that will exacerbate these problems, and offering tailored tax breaks to companies which are not bringing anything to the table except making us APPEAR competitive with other states is one of those solutions.

  • Rose

    I work for a large company that has consolidated business locations from other states and was given tax breaks. The majority of those employees from other states did not want to relocate to Michigan. We are going through another expansion stage, and the same thing will likely happen again. I think it’s a good thing for Michigan if it can be specified that the new hires must be Michigan residents. Either way, the employees will pay state taxes, and that alone must certainly be a win for Michigan.

    • Frank

      Rose, it would be a win for Michigan only if the new taxpayers taxes offset the tax breaks that were given. Therein likes the objection from most of the legislators who are opposed to this method of attracting business. The new taxes coming in never even come close to offsetting the tax breaks given. It is a net financial loss to the state every single time. Yet they call this “remaining competitive”. From a financial standpoint it is called “going further into debt”.

      It is a bad idea, it always has been a bad idea, and there is a very good reason that only a dozen or so states use this method in the first place. These are states that we do not want to be in competition with in the first place. We should have higher aspirations than they do, and our goals and strategies should reflect that. Yet we seem driven by shallow-minded legislators who insist on falling back to the early 19th century manufacturing mindset at the first sign of adversity. They would rather make themselves look re-electable than stay the course that will eventually guide Michigan out of its current rut and on to a path of long-term prosperity.