Filed under: Etc., Plants/Manufacturing, Chevrolet, GM, Earnings/Financials
City of Flint gives GM tax breaks for Cruze and Volt factory
Giveth, and taketh away, isn't that always the story? On the taketh away side, GM has recently lost a serious chunk of change. On the giveth side, The General received a $56 milion package of tax credits and grants to keep an SUV factory open in Ohio. It has also just received another package of tax credits from the city of Flint, Michigan to aid its investment in a factory that will build engines for the new Volt and Chevy Cruze. Approved over some constituent disapproval by the Flint City Council, getting GM to build the factory there will keep 300 jobs in the city. GM is now looking to the state of Michigan for more tax incentives.[Source: Detroit News via Green Car Congress]
Reader Comments (Page 1 of 1)
BoxerFanatic 6:50PM (8/28/2008)
Isn't Flint Michigan, as well as most of the rest of the state, in dire financial straights?
And they are giving lots of money away to GM to keep existing jobs there, we're not even talking about new jobs, to raise the tax base and overall economy of the area?
Those tax breaks mean less revenue for the flint government. Normally, I would say that is fantastic.
Under one condition... that the city of Flint, and possibly Michigan, as a whole to follow, responds with spending cuts to match the lack of revenue from GM.
I am all for tax breaks.
But here is where the house of cards falls...
Michigan, and very likely Flint, also, are usually run by big government types with a "D" for their party affiliation. Michigan is the only state in the union where poverty actually statistically rose over the most recent measuring time period, according to the news wire reports I've heard in the last couple of days. Everywhere else, poverty has stayed stable, or receded, and the rate of health insurance also increasing.
Michigan, or Flint specifically, doesn't seem like a place very likely to cut government spending much, nor relieving the tax burdens on it's citizens, the way they are for GM to merely stay in place.
If they don't cut spending, when they lose revenue from GM, the revenue difference will have to come from somewhere. The taxpayer-citizens, who are living in the economically difficult location of Flint Michigan will bear an increased tax burden.
now, between GM, and taxpaying citizens, I don't think either one of them should be over taxed. But the key is spending.
If they keep the tax on GM, all of GM's customers pay the tax burden. No corporation ever pays taxes. They expense taxes, and build it into the cost of the good or service they sell for profit.
If they lower the tax on GM, the people of Flint, and Michigan pay the increased tax burden, it just shifts between groups of people.
Without spending cuts, and a philosophical change in government, to get out of people's lives, and out of their way, even if some people don't like it, then shifting the tax burden around is almost a moot point. The same goes for the rest of the country, Michigan, and the greater Detroit area especially, are just a few steps further down that "tax and spend" road than the rest of the country.
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James Sonne 7:21PM (8/28/2008)
Well said, and I second your comments entirely. In summation, the state is using the tax payer's dollars to pay off a company to keep jobs in the state ... so basically everyone in the state just paid the price of an SUV for absolutely nothing except a couple hundred of jobs to remain in a flounder state.
It's no wonder the state is failing. My in-laws are from Michigan, and I have discussed with them many a time the situation in the state. Rampant spending on nothing of use, paying off corporations to have a handful of jobs retained in the state which ultimately is a negative sum game, and public school buildings all over the rural parts of the state literally collapsing and being condemned from lack of funds. It's not just too few books, it's years of lack of structural maintenance. A state that doesn't take care of its education doesn't take care of anything of use, as education brings money to a region, demands technical jobs and provides the job market for them.
If people were offered better education, good jobs, cheap healthcare, and state revenue would follow.
Having said all of that, $56mil for GM is a drop in the bucket. That probably doesn't pay for a year of running a plant at full steam. I'm sure they're happy to take it, build a few more SUVs no one will buy, and then book it out of the state in favor of Canada next year. To the state of Michigan, however, $56mil is quite a bit, and that's about 25 schools that could have been build instead.
VP 7:24PM (8/28/2008)
There are a bunch of states here in the south with the "R" affiliation that gave tax breaks to new and existing foreign automakers. So get of the soap box.
James Sonne 8:01PM (8/28/2008)
Yes VP, but those states have the money so to do. Irresponsibility is one thing when you have an intact budget, but it's something entirely more egregious when things like education and healthcare take the cut because of it.
why not the LS2LS7? 8:16PM (8/28/2008)
This is standard fare, cities giving big breaks to large employers. Look at Wal-Mart. If they don't give breaks, the companies will go elsewhere.
So you give a small break and in return, you get taxes on houses people own, and all the sales taxes from the money that puts into your local economy.
I also want to mention as someone who was born in Flint, don't believe the hype. Poverty is not crushing in Flint. Yeah, it is in parts of town, but most people, including auto workers, live in Flint Township or other nearby cities.
And did you know where the poverty line is? A person in poverty is very likely to own their own car, they have a cell phone, and the rate of home ownership is similar to that of the general population.
On a more personal note, how about complaining about your own government first and leave Flint alone?
Scott 8:58PM (8/28/2008)
boxerfanatic, this is simple, and is where your 'house of cards' falls:
without the plant: 0 tax dollars coming in from this plant. more unemployment, more crime.
with the plant: $6 million in taxes, plus the income tax from the workers.
and this is just direct taxes. never mind the property and income taxes from the suppliers to the plant and their workers, or the guy at the party store across the street who might otherwise be out of a job if it wasn't for the plant workers coming in every day.
we aren't losing revenue from GM, we are gaining it. Yes, it is less than the maximum possible we could get, but then GM would go elsewhere.
with a whopping 35.5% poverty rate in flint, (and 16.8% in Genesee county, above the state average of 14 and the national average of 12.5) we need every job we can get. While this certainly won't help those in poverty directly, spinoff jobs from this plant and other developments, will.
tankd0g 10:58PM (8/28/2008)
Scott: Your income tax, taxes paid by outside suppliers, income tax paid by GM etc. do not go to your city, they go to the federal and state governments to pay the interest on the war in Iraq. At best the city can hope to get a few more years of property taxes paid on houses that are going to be defaulted on eventually anyway. We have a similar situation where I live with call centers, they come here and hire hundreds of people, when the tax breaks run out and they pack up and leave and the place is worse off when it started because people tend to accumulate more debt when they have a job.
Judyz 10:07AM (8/29/2008)
First off I am so sick of hearing about Republicans and Democrats. Can't anyone just state a position or an opinion without announcing to the world that they are a card carrying member of one party and only ascribe to one set of ideas.
States and Provinces everywhere give tax breaks? Why? Are they all idiots? No. Even once the tax break is taken into consideration they still end up ahead overall and if you don't offer the tax breaks you wont get the plant. Why would a company locate in your area if they can locate elsewhere and get a tax break? So you think only rich areas should offer tax breaks? Wouldn't the net effect be more investment in the places that don't need it and less in the places that do? Sure there are always going to be some companies that will pick up once the tax breaks end but manufacturing plants are not as easy to relocate as call centres. It is a free market economy and if you choose not to compete you will not survive or thrive. Choosing to compete gives you a chance of raising your tax base and maybe having the money to pay for schools. Choose not to and the plant will go to Mississippi or where ever.
elprogramer 7:03PM (8/29/2008)
I'm amazed that you can sum up our entire existence because of a movie and your precognitive bias against "democrats".
Astounding! A modern oracle!
mike 7:13PM (8/28/2008)
I would enjoy this while it lasts, because Supreme court will make it illegal for local governments to give these credits to attract business.
The argument was (a few years ago) which is true by the way that a company asks a locality for a tax break, when the company decides to do major retooling they have a choice stay here or move somewhere else, so they ask locality for more tax breaks, if they refuse some other locality will give it. Politicians are eager to give those credits because any time a manufacturer comes to town a lot of people are getting jobs. The end outcome is that a manufacturer no matter where it is, is always getting the tax credit.
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Sleighboy 7:14PM (8/28/2008)
That's how you do it, remove the taxes to aid the market.. not boost inflation with federal bail-outs, which ends up hurting you in the long-run.
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Gardiner Westbound 9:28PM (8/28/2008)
Apparently the $435-million Canada and Ontario gave GM to keep the Oshawa plants open doesn't count.
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Rocketboy 9:01AM (8/29/2008)
ProTip: If you make a good product, you will not depend on gov't (taxpayer) handouts to stay afloat.
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mr.ed 9:06AM (8/29/2008)
The $56m Moraine OH deal fell through because GM has no product to produce there. How the might have fallen.
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Tagg 12:16PM (8/29/2008)
I live about 15 minutes south of Flint in a town called Fenton and am very familair with Flint having attended University of Michigan-Flint.
The state is in financial strain as are many others but most of the difficulty is centered around southeast Michigan. Flint falls somewhat in that catergory but in essentially is in mid-Michigan. Other areas of the state are doing well like Grand Rapids and northern Michigan because they do not have the symbiotic relationship with the auto industry.
Flint however is a very different story. It is simply the worst of the worst. The city has one of the worst mayors and worst city councils in the U.S. The mayor has council members cars towed for no reason and city council is nothing more than a comedy show. An example of Flint government at its finest the nations 3rd most dangerous city thought it would be ok to close the jail to save money. While they've already laid off many police officers and fire fighters.
The bottom line is Flint has no money to spend so giving GM a tax break to be in Flint is a non-issue. If anything it is a good thing because it could really raise the morale of the area that is constantly labled as a "dump" and "dangerous". Yes Flint is bad but like Detroit the surronding areas are amongst the nicest in the nation. The problem is people here are bombarded by politicans and media telling them how bad everything is leaving people with a learned helpessness. Many feel lost because they have no other skills other than bolting wheels on a car and feel entitled a high paying job. At the same time they hold on to the lie told by their local union leaders, govenor, state senators and a presdential candidiate that their jobs are comming back so they never move on.
Thats Flint in a nutshell. If you want the fictional Flint pop in Roger and Me.
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dkw 3:49PM (8/29/2008)
@Taqq:
I live in south east Michigan, and find it surprising that you yourself call Flint "simply the worst of the worst," and then state that the problem is that the people are being bombarded by politicians and the media telling them how bad everything is. What did you just do?
Also, i find it amuzing that when a "D" state cuts taxes to benefit business, they are still damned by people on here. Damned if you do, Damned if you don't. For once you think people would want to help out one of their fellow 50 states, last time I checked, "D" or "R", we're all Americans.
Tagg 1:06PM (8/31/2008)
Its the worst of the worst because of the awful politicians all trying to get a slice of the pie while neglecting the real issue. I never said Flint was bad because of its citizens, I said its bad because of the people making the decsions for the people like closing the jail and layoffs at the fire department. Services that should NEVER be cut.
Do not try and put words in my mouth and twist things around.
Also, I never said anything about the tax breaks being bad so if that was meant as a slight at me then re-read the post. I said the tax break is good for the city. If it was meant for others then make it another post and not a reply to mine.