Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/64386
Authors: 
Bartik, Timothy J.
Erickcek, George
Year of Publication: 
2010
Series/Report no.: 
Upjohn Institute Working Paper 10-164
Abstract: 
This paper estimates that Michigan's MEGA tax credit program to attract and retain businesses has large employment and fiscal benefits. MEGA provides discretionary tax credits to businesses, with the tax credit tied to the personal income taxes paid by employees on the new or retained jobs. We estimate the economic effects of MEGA using the Upjohn Institute's REMI model, and the research literature on how business location decisions respond to taxes. We estimate the fiscal effects of MEGA based on the research literature on how government spending and revenue respond to state personal income and population. The estimates suggest a lower bound to MEGA's effectiveness of being decisive in a little over 8 percent of the MEGA projects. Even with this modest success rate, MEGA is estimated to have fiscal benefits that offset about two-thirds of its gross fiscal costs. The net fiscal costs per job created of MEGA average less than $4,000 per job-year, which is less than the labor market benefits of job creation.
Subjects: 
state and local economic development policy
tax incentives
fiscal impact analysis
labor market benefits
regional multipliers
JEL: 
R11
R23
R28
R30
R58
H70
Document Type: 
Working Paper

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