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Tax incentive debate revives as Solar firm leaves state

News of the planned move reignited debate over Gov. Rick Snyder’s plans to phase out the use of tax credits to attract and retain industry. But Wolfgang Niedrist, managing director for U.S. sales at Fronius USA LLC, said the decision to relocate from Brighton to Portage, Ind., was mainly based on proximity to suppliers, customers and an airport, and finding the right 400,000-square-foot building.

Michigan’s recent repeal of the Michigan Business Tax — which leaves LLCs and most other Michigan firms with no state business tax — “probably” would have made a difference, but “this came too late,” Niedrist said.

Fronius, with more than 4,200 employees worldwide, will keep 25 to 30 employees in Brighton after its move, down from about 50 today, he said.

The Indiana Economic Development Corp. announced the move and the new plant Thursday, noting it had offered Fronius — which makes battery charging systems, welding technology and solar electronics — $4.25 million in tax credits and other incentives.

The news puzzled Michael Finney, CEO of the Michigan Economic Development Corp. He said Michigan — which is phasing out tax incentives but still has use of them today — offered Fronius a bigger package than Indiana, one totaling $12.8 million.

But Niedrist said: “The decision to go there was without any tax incentives.”

Terry Conley, a state and local tax partner with business advisory firm Grant Thornton, LLP in Southfield, said whatever the reasons for the Fronius move, he predicted such relocations when Snyder announced plans to phase out business tax credits.

“I said it would occur where companies are adding substantial payroll and they have the flexibility to move their operations,” Conley said.

The lure of tax credits from other jurisdictions will be “just too substantial” for many companies to resist, especially when coupled with lower wages and fewer unions, he said.

Snyder says a better growth model than tax credits is “economic gardening,” under which a lower tax rate, streamlined regulations and an improved business climate encourage new companies to form and existing companies to stay and expand. A centerpiece of Snyder’s plan was the elimination of the MBT in his recently approved budget. The tax, which applied to nearly all Michigan companies, was replaced with a 6 percent profits tax which applies only to corporations that issue public or private stock.

Industry tax credits in Michigan, not counting film industry credits, have totaled about $200 million a year in recent years.

Finney said $100 million will be available for the fiscal year that starts Oct. 1 and the state has great flexibility in how it doles out the money to firms. It’s not true Michigan will no longer offer incentives, Finney said. Instead, “we’re out of the tax credits game.”

Michigan Democratic Party Chairman Mark Brewer said Snyder’s policies are costing jobs.

“Other states are going to continue to use these credits and they’re going to poach our jobs,” Brewer said.

Indiana’s corporate tax rate of 8.5 percent is slated to drop to 6.5 percent by 2015. The Indiana news release said the Fronius announcement “comes on the heels” of two other announced company moves from Michigan to Indiana.

Blair West, a spokesman for the Indiana Economic Development Corp., did not answer directly when asked if Michigan’s move away from tax credits put it at a disadvantage. She said Indiana Gov. Mitch Daniels agrees with Snyder that “building the right climate for jobs and investment” is key. But she sent a list of steps Daniels and the Indiana Legislature have taken to improve the climate there, and the list includes several tax credit initiatives.

Tags: Debate, Debate Revives