Michigan’s shadow budget: Tax breaks that cost billions

Part of the reason Michigan doesn’t have enough money to pay for public services like education, health care and environmental enforcement, is that the state is giving away billions in tax breaks (a projected $35.8 billion in 2009) for everything from NASCAR speedways, to church vehicles, to companies that install pollution control equipment that is legally required anyhow.

Though the film tax credits — which are expected to cost the state $117 million in 2009 — did get some attention during this year’s tortured budget process, for the most part there is little public scrutiny of who is excused from paying taxes and why.

In the Executive Budget Appendix on Tax Credits, Deductions, and Exemptions, fiscal year 2009, the Treasury Dept. lists Michigan’s tax breaks and notes that some recommend they be reviewed regularly to promote tax equity, fiscal discipline and political accountability.

Here is a selection of some of the tax breaks that caught my eye:

NASCAR Safety Credit $1,900,000
Provides a credit for traffic control costs for a motorsports event at an eligible motorsports stadium (50 percent for 2009 and 100 percent thereafter).

NASCAR Speedway Credit $1,700,000
Provides a credit for tax years 2008 through 2012 for capital expenditures on an eligible motorsports stadium and its grounds.

New Motor Vehicle Dealer Inventory Credit $9,100,000
Provides for a credit to a new Michigan licensed motor vehicle dealer to claim a credit equal to 0.25 percent of the amount paid to acquire new motor vehicle inventory in the tax year.

Floor Plan Interest Deduction $3,500,000
Provides a deduction for interest payments on credits made by a motor vehicle manufacturer to a retailer to defray the retailer’s expense of maintaining an inventory of cars.

Low Grade Hematite Credit $3,000,000
Provides a credit for taxpayers that consume qualified low-grade hematite (iron ore) in an industrial or manufacturing process.

Air and Water Pollution $48,000,000
Exempts the sale of personal property purchased or installed as part of air or water pollution control facilities.

Aircraft Parts $8,251,000
Exempts sales of parts and materials affixed in Michigan to passenger, cartage, and certain other aircraft from tax.

Church Construction $3,200,000
Exempts materials used in the construction of a church sanctuary. This exemption was created by Public Act 274 of 1998.

Church Cars $3,889,000
Exempts sales of most cars and trucks to regularly organized churches or houses of religious worship.

Vending Machines and Mobile Facilities $28,500,000
Exempts the portion of gross proceeds representing commissions paid to an entity otherwise exempt from the sales tax where the gross proceeds are from certain non-electric vending machines where consideration is 10 cents or less. Also exempts sales of nonalcoholic beverages, and items sold near room temperature from a mobile facility or vending machine.

Air and Water Pollution Control $160,000,000
Exempts air and water pollution control equipment from the property tax after approval and certification by the State Tax Commission.