Running Head: Business Incentives

Business Incentives

Name of student

Name of university

Date
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Business Incentives

Instructions:

Read Michigan Tax Incentives—Corporate Welfare? and A Primer

on Certificated Credits Under the Michigan Business Tax .

(Note: When you click on the Forbes article, it may redirect you
to the Forbes home page. To locate this article, you may need to
search for the article title in the search box in the upper right-
hand corner of the page or manually copy and paste the
following hyperlink into your
browser: https://www.forbes.com/sites/taxanalysts/2015/03/1
0/michigan-tax-incentives-corporate-welfare/ )

Then, in your initial post, consider the following questions:

 Is it the role of government to provide incentives to business?
Why or why not?
 Do you agree with Michigan’s decision to extend tax credits in
the manner it has? Why or why not?
 Is it ethical for a business to accept government incentives in all
cases? Alternatively, is it the fiduciary responsibility of
businesses to seek government aid in every instance? Explain
and defend your responses.
 How might a business that accepts incentives effectively respond
to criticism that it is accepting corporate welfare?
In response to your peers, state whether you agree or disagree
with their conclusion regarding Michigan’s tax credit program.
Be sure to justify your response. Do you agree with your peer’s
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Business Incentives

assessment regarding the ethics of accepting government aid?

Why or why not?

Response 1:

I’m on the fence on whether or not it’s up to the government to

provide incentives to businesses. I don’t believe it should be the
job of the federal government, but I do think that it should be
handled on a state level. Some states want businesses there in
order to provide jobs, so it should be up to the state on whether
or not to provide incentives to businesses in their state and not
the federal government.
No, I don’t agree with Michigan’s decision to extend tax credits
in the manner that it has. (MEGA SBT MBT CIT). Each tax credit
legislation they have passed has generated less and less revenue
from business taxpayers. For example, the CIT legislation
permitted MEGA credit holders to choose to switch to the CIT
and forego the MEGA credits or to continue to file under the MBT
Act and claim credits, giving companies the option to continue
to benefit from refundable credits for which they were eligible
(Pratt, Savino, & Zin, 2015). Under this, businesses were able to
claim both MBT and MEGA credits, essentially receiving two tax
credits, and would still be eligible to claim said credits until
2032; even though legislation was in place to stop that from
happing in 2011 (Pratt, Savino, & Zin, 2015). I agree with Brunori
when he says that “MBT is silly and should be repealed
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Business Incentives

(forbes.com, 2020).”
No, I don’t think it’s ethical for a business to accept government
incentives in all cases. This is because as a government
employee, they kind of double-dip in my eyes. There are
government programs in place that all orders have to be done
through a small, veteran, minority, or woman-owned business.
So they’re guaranteed business from the government on that
front, plus getting tax incentives. As far as big businesses are
concerned, they do enough business that they should be able to
financially support themselves without government tax breaks
and incentives.
I don’t think it’s the fiduciary responsibility of businesses to
seek government aid in every instance. This is due to the
housing bubble in 2008 when the government had to bail out
numerous businesses in order to avoid another major
depression. In extreme cases, yes, I feel it’s ok for a business to
seek government aid but not for EVERY instance.
A business that accepts incentives can effectively respond to
criticism that it is accepting corporate welfare using the
economic development and impact argument. The business can
argue that it is generating new economic activity or bringing in
financial activity to a certain area (Pratt, Savino, & Zin, 2015).
The other argument to that is that if a business does any
charitable giving, it could argue that those same incentives are
funding charitable giving.
References:
Brunori, D. (2020). Michigan Tax Incentives -- Corporate
Welfare?. Retrieved 2 August 2020,
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Business Incentives

from https://www.forbes.com/sites/taxanalysts/2015/03/10/m
ichigan-tax-incentives-corporate-welfare/#3fb9228475ba
Pratt, E., Savino, C. & Zin, D. (2015). A primer on certified credits
under the Michigan business tax. State Notes: Topics of
Legislative Interest. Retrieved 2 August 2020,
from http://www.senate.michigan.gov/sfa/publications
%5Cnotes%5C2015notes%5Cnoteswin15lpcsdz.pdf.

Response 2:

While I agree that states and local governments must have a continued focus on economic
development, the responsibility should not ultimately end up in the taxpayer’s hands.
Financial incentives are not offered by the citizens are taxpayers, and should not be held liable
for their implementation. Utilizing financial incentive programs to be an attractive business
location has shown success in the past for improving the economic landscape, but they also
have potential to hinder individual growth from the populous in the area. Governments should
strategize to establish ways to attract businesses, but do so carefully as to keep in mind the
potential actions of their citizens. Creating successful business environments by retaining
established businesses should be a primary focus rather than looking to offer subsidies for
outside corporations (Bundrick, 2016). Offering incentives may not necessarily be the best
option if they cannot provide positive, long-term, benefits to the community and its members.
I would have to disagree with Michigan’s plan to extend credits in the way that it did
because of the poor financial impact it has had on the state. The state will owe nearly $10
billion in tax credits for almost another decade, along with $500 million of liability each year
(Brunorl, 2015). The details of this program may have seemed too good to be true for a
reason. The ability for corporations to choose when they want to “cash-in” on their credits
hands the state and it’s taxpayers an extremely volatile favor to owe.
It is not always unethical for businesses to be accepting of government incentives. It
does become a confusing arena to play in, however. There are potentially millions of dollars
at play in these scenarios, and that kind of money and opportunity can alter motives for those
involved. If the breaks are truly to help start-ups or struggling business during difficult times
(i.e. planet Earth 2020), they can be beneficial. Unfortunately, many of these deals are
political in nature and may not be fairly distributed.
In order to even out the playing field, the government should mandate an application
process for companies looking for credits or breaks. This way, each applicant can be
thoroughly vetted and determined if suitable for these privileges. Although, this process needs
to be fair so implementing a blinding process and including more than one party reviewing the
applicants would be necessary.
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References
Brunorl, D. (2015). Michigan tax incentives -- Corporate welfare? Retrieved
from https://www.forbes.com/sites/taxanalysts/2015/03/10/michigan-tax-incentives-
corporate-welfare/#6dc11a975bad
Bundrick, J. (2016). Tax incentives and subsidies: Two staples of economic
development. Retrieved from https://uca.edu/acre/2016/08/19/tax-incentives-and-
subsidies-two-staples-of-economic-development/

Business Incentives

Argue about the character of state to give incentives:

While I agree that states and local governments must have a continued focus on economic

development, the responsibility should not ultimately end up in the taxpayer's hands. Financial

incentives are not offered by the citizens who are taxpayers and should not be held liable for

their implementation. Utilizing financial incentive programs to be an attractive business location

has shown success in the past for improving the economic landscape, but they also have the

potential to hinder individual growth from the populous in the area. Governments should

strategize to establish ways to attract businesses but do so carefully as to keep in mind the

potential actions of their citizens. Creating successful business environments by retaining

established businesses should be a primary focus rather than looking to offer subsidies for

outside corporations. Offering incentives may not necessarily be the best option if they cannot

provide positive, long-term, benefits to the community and its members. Some states want
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Business Incentives

businesses there to provide jobs, so it should be up to the state on whether or not to provide

incentives to businesses.

Argue against Michigan’s choice to increase tax praises:

I would have to disagree with Michigan's plan to spread praises in the way that it did because of

the poor financial impact it has had on the state. The state will owe nearly $10 billion in tax

credits for almost another decade, along with $500 million of liability each year. The details of

this program may have seemed too good to be true for a reason. The ability for corporations to

choose when they want to "cash in" on their credits hands the state and its taxpayers an

extremely volatile favor to owe. Each tax credit legislation they have passed has generated less

and less revenue from business taxpayers. For example, the CIT regulation allowed MEGA

credit containers to select to change to the CIT and decline the MEGA praises or to remain to file

under the MBT law and claim praises, providing organizations the ways to remain in advantage

from refundable praises for which they were qualified.

Argue for a business to accept government incentives:

It is not always unethical for businesses to be accepting of government incentives. It does

become a confusing arena to play in, however. There are potentially millions of dollars at play in

these scenarios, and that kind of money and opportunity can alter the motives of those involved.

If the breaks are true to help start-ups or struggling businesses during difficult times, they can be

beneficial. Unfortunately, many of these deals are political and may not be fairly distributed.

There are government programs in place that all orders have to be done through a small, veteran,

minority, or woman-owned business. So, they’re guaranteed business from the government on

that front, plus getting tax incentives. As far as big businesses are concerned, they do enough
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Business Incentives

business that they should be able to financially support themselves without government tax

breaks.

Argue for business that accepts incentives effectively:

To even out the playing field, the government should mandate an application process for

companies looking for credits or breaks. This way, each applicant can be thoroughly vetted and

determined if suitable for these privileges. Although, this process needs to be fair so

implementing a blinding process and including more than one party reviewing the applicants

would be necessary. A business that receives inducements can efficiently respond to disapprove

that it is accepting business safety using the economic development and impact argument. The

business can argue that it is generating new economic activity or bringing in financial activity to

a certain area.