TRAVERSE CITY -- State lawmakers gave Meijer Inc. an $8.5 million tax break at the same time they levied a tax surcharge on other Michigan businesses and raised the personal income tax rate.
Meijer's political clout was demonstrated when Gov. Jennifer Granholm and leaders of the state House and Senate approved special tax breaks in the new Michigan Business Tax worth up to $4.5 million a year for the Grand Rapids-based retail chain.
Elected officials then upped it to $8.5 million when the state repealed the sales tax on services by levying a special 22 percent tax surcharge on Michigan businesses.
The tax break doesn't specifically name Meijer, but is structured so that Meijer is the only existing state-based business that qualifies, according to an analysis done for the Michigan Senate.
Meijer wasn't the only special interest to receive a targeted tax break. New car dealers, professional sports stadiums, Michigan International Speedway, banks and the insurance industry all received special credits. But Meijer was the only business intentionally singled out to receive a special tax break above and beyond its retail industry competitors.
Meijer spokeswoman Stacie Behler, who is also treasurer of the Meijer Political Action Committee, declined to answer questions about the tax break. Meijer instead sent an unsigned statement to the Record-Eagle that said the legislation was intended to "incent growth in large concentrations of skilled workers typically found in headquarters or research facilities.
"Insuring jobs for higher-paid, higher-skilled jobs was a common theme (of the Michigan Business Tax)," the unsigned Meijer statement said.
Political watchdogs suspect the tax break was more a result of Meijer's political might.
Meijer gives big to state politicians
From Oct. 31, 2006, through October 2007, Meijer's PAC gave almost $130,000 to state politicians.
"Clearly with (Meijer's) campaign contributions and lobbying they are important actors in state politics," said Rich Robinson, executive director of the nonpartisan Michigan Campaign Finance Network. "Certainly, there's a case that could be made the special tax consideration was a function of political clout as much as financial need."
Michigan campaign finance reports show the Meijer PAC gave Democrat Granholm's leadership fund $17,000; Republican Senate Majority leader Mike Bishop's political funds $17,000; and Democratic state Speaker of the House Andy Dillon's political funds $14,500 during the October 2006-October 2007 cycle.
Reports for activity after October 2007, when the tax break was upped by $4 million, won't be reported until April.
The political caucuses for the House and Senate took in $66,000 from the Meijer PAC during the reported time period. The largest benefactor at $30,000 was the House Democratic Caucus.
Republican Sen. Nancy Cassis, of Novi, said House Democrats instituted the Meijer tax break.
Democratic Rep. Steve Bieda, of Warren, heads the House committee on tax policy and worked with Cassis on the legislation. He did not return several messages left at his office.
Cassis, chairwoman of the Senate Finance Committee, said retailers have a larger tax burden under the new Michigan Business Tax. She said House Democrats added the Meijer tax break, but then rejected efforts to expand it to other large retailers because they wanted to reward businesses headquartered in Michigan.
Instead, they added a $300,000 tax break directed at the Spartan Stores chain.
Cassis voted for the original $4.5 million credit for Meijer, but against raising it to $8.5 million.
Meijer made the request
Scott Schrager, a legislative liaison for the Michigan Department of Treasury who participated in Michigan Business Tax negotiations, said Meijer officials made the request for a tax break directly to the leaders of the House and Senate, along with the Treasury.
The language was inserted in a conference committee, where the final bill was negotiated between the House, Senate and Granholm administration. Schrager said he didn't know if Meijer provided the actual language inserted in the bill, but it didn't come from the state treasury department.
"Meijer wanted the tax system to recognize some of the unique facets of their business," Schrager said. "They provided quite a bit of evidence on how the new tax law would affect them, which is a little different than them just saying, 'Why don't you do this for us.'"
State Rep. Howard Walker, R-Traverse City, said the tax breaks were among the reasons he voted against the tax bills.
"I really thought special carve-outs for individual entities was just pure bad policy," he said.
Walker said the tax break gives Meijer an advantage over its competitors, whether they are competing big box chains such as Wal-Mart, or small local grocery store chains.
Michael LaFaive, a fiscal policy analyst with the Mackinac Center for Public Policy, said tax breaks such as those provided to Meijer go to special interests with strong lobbyists and deep pockets.
"If the state can argue a specific credit for Meijer is good, why isn't it good for all of the businesses in the state?" LaFaive said. "Instead, they're handing out tax breaks and special favors willy-nilly."
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