Tuesday, August 17, 2010

Optimism of New Jobs Overshadows Cost of Doing Business in Detroit

Michigan Expats - Commentary - See All Commentary

By Doctor


Detroit welcomed 700 new employees this week as Quicken Loans began their transition to settle their headquarters in the Compuware Building downtown on Monday. Each worker even received a gift bag with coupons and discounts from local restaurants and shops.

The news coverage has been prominent and positive in the Detroit papers and trumpeted as a potential catalyst in attracting more businesses and contributing to the revitalization of downtown Detroit. Quicken Loans founder and Chairman, Dan Gilbert should be applauded and appreciated by the people of Detroit for making the move happen and reaffirming a commitment to Detroit to hopefully relocate more jobs downtown.

Certainly the good news, new employees, and a source of optimism amongst the economic troubles of recent years is welcome, but looking into the details of the Quicken Loans relocation highlights three key issues that are important to understand the challenges and obstacles that Michigan must address to improve her economy.
  1. As the Free Press points out:, "Amid the excitement, it helps to remember that the Quicken move reflects a transfer of jobs within metro Detroit, rather than new jobs or growth from outside the region. And it also may bear remembering that when Quicken founder and Chairman Dan Gilbert first announced he would move his headquarters downtown from Livonia, in November 2007, he was projecting bringing 4,000 workers downtown and building his own headquarters skyscraper."
  2. Quicken Loans gave all of its employees in the new Detroit office raises to offset the city income tax (1.25% for nonresidents and 2% for city residents)
  3. While Gilbert and Quicken Loans has been praised for their commitment to Detroit, they have also received major tax breaks from Detroit and the state that could total upwards of $370 million over 12 years according to the Detroit News
These points bring up important questions Michigan must ask herself:
  • How come it took three years, almost $400 million dollars in tax breaks, and the company eating the increased city income tax to relocate 700 jobs from Livonia to Detroit?
  • Why would businesses outside of Michigan want to consider going through all of that hassle to relocate jobs from other states? 
  • If it takes significant tax breaks in order for a company to do business in Michigan, why not lower taxes to that rate to begin with and avoid all of the unnecessary negotiations and political pandering?
  • How big are these obstacles to entrepreneurs and small businesses that drive long term economic growth?
  • Can Michigan's economic revitalization occur within a business climate where businesses cannot succeed without subsidies whether it be in the form of tax breaks, grants, or employee salaries?
Despite the rough economic times and business climate, Michigan has been blessed with many businesses and entrepreneurs like Dan Gilbert committed to continue to succeed in Michigan despite these obstacles. They have the political connections to make these tax deals happen and are willing to absorb the higher costs of doing business in Michigan. In order for Michigan's economic recovery to really take hold it needs to create an environment friendly to creating more such entrepreneurs as opposed to one where they need to battle to survive.

What are your thoughts about the optimism in Detroit and the broader political climate? Please let us know and leave a comment.

2 comments:

  1. This goes back to some of the other posts.... Michigan - why do you need to make it so hard to get a good business environment. It doesn't need to be that hard. How about just eliminating these barriers for EVERYONE.

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  2. Agreed, instead of the government picking favorites (businesses, industries, etc.), they need to make it cheap for everyone to do business here. Let's be Delaware!

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