Michigan's Costly Bet on Corporate Subsidies: A Warning Every Community Should Hear
A Detroit News op-ed co-published by the Mackinac Center for Public Policy found that Michigan's corporate subsidy program failed to deliver. But Michigan isn't alone — Illinois, Ohio, Wisconsin, and New York have all faced the same accountability gap. The lesson for every community isn't to abandon incentives. It's to enforce them.
When the promises don't get kept
In a widely circulated op-ed published in The Detroit News and co-authored by researchers at the Mackinac Center for Public Policy, the headline said what many government finance officials already suspected: "Michigan's Costly Bet on Corporate Subsidies Hasn't Paid Off."
The piece documented what years of economic data had made increasingly difficult to ignore. Michigan had committed billions of dollars in corporate incentives — tax credits, grants, subsidized financing — in exchange for job creation and investment commitments that, in a significant number of cases, never materialized at the promised scale. The state had bet public money on private performance. And when the performance fell short, the public absorbed the loss.
It is a story that resonates well beyond Michigan's borders. The same structural problem — incentives awarded on the front end, compliance monitored inadequately on the back end — plays out in communities across the country, including right here in Missouri.
The accountability gap the Mackinac Center identified
The Mackinac Center's analysis pointed to a consistent pattern: economic development incentive programs are designed and evaluated based on projected outcomes, but the mechanisms for verifying actual outcomes are weak. Companies receive the subsidy. The jobs numbers get reported — often by the companies themselves, with limited independent verification. And when the numbers fall short of what was promised, the clawback mechanisms that exist on paper rarely get used in practice.
This is not a Michigan-specific failure. It is a structural feature of how most state and local incentive programs operate. The political energy goes into deal-making. The compliance infrastructure — the systems, staff, and processes needed to verify that commitments are being met — gets far less investment.
The result is predictable: communities end up subsidizing outcomes they were never actually promised, because no one is checking closely enough to know the difference.
Missouri is not immune
Missouri's economic development incentive portfolio is substantial. TIF districts, Missouri Works tax credits, Chapter 100 bonds, Enhanced Enterprise Zone designations — these programs collectively represent hundreds of millions of dollars in annual public subsidy, spread across dozens of communities and hundreds of individual agreements.
Each of those agreements carries compliance obligations. Job creation commitments. Wage thresholds. Capital investment requirements. Reporting deadlines. And in most cases, clawback provisions that allow the community to recover incentive value if the recipient falls short.
The question is whether anyone is actually using those provisions.
In most Missouri communities, the honest answer is: not systematically. Finance directors are managing full budget cycles. Economic development staff are focused on the next deal. The compliance monitoring that would turn clawback provisions into actual recoveries simply doesn't happen with the rigor it requires.
The difference between a clawback provision and a clawback
The Mackinac Center's critique of Michigan's program was not primarily that the incentives were too generous. It was that the accountability mechanisms were too weak. The state had the legal authority to recapture value when companies fell short. It rarely exercised that authority.
That gap — between what the law allows and what actually happens — is exactly where Missouri communities lose money they are legally entitled to recover.
A clawback provision in an agreement is not the same as a clawback. The provision is just language. The clawback requires someone to:
1. Track the compliance obligations in every active agreement
2. Verify that reported performance data is accurate
3. Identify when a shortfall has occurred
4. Calculate what is owed under the clawback formula
5. Coordinate with legal counsel to pursue recovery
Most communities have step one covered, at least partially. Steps two through five are where the process breaks down — and where the money disappears.
What systematic compliance monitoring actually prevents
The Michigan story is useful not just as a cautionary tale but as a baseline for understanding what's at stake when compliance monitoring is done well versus done poorly.
When monitoring is weak:
- Companies self-report job numbers that go unverified
- Shortfalls accumulate over multiple reporting periods before anyone notices
- The window to pursue clawback closes — either because the agreement's enforcement period expires or because the evidentiary record becomes too thin to support a claim
- The community has subsidized outcomes it was never actually promised
When monitoring is rigorous:
- Reported data gets cross-referenced against payroll records, tax filings, and other independent sources
- Shortfalls get identified in the reporting period when they occur, while the enforcement window is still open
- Clawback calculations are documented and defensible
- Communities recover value they are legally entitled to — and send a clear signal to future incentive recipients that compliance obligations are real
The difference is not primarily a legal one. The agreements already give communities the authority they need. The difference is operational: whether the monitoring infrastructure exists to make that authority meaningful.
The contingency model makes this accessible for Missouri communities
One reason compliance monitoring often doesn't happen is cost. Hiring staff or retaining outside counsel to run a systematic monitoring program requires budget commitment that many communities can't justify — especially when the return is uncertain.
That's the case for a contingency-fee model. When a compliance firm works on contingency, the community pays nothing unless recoveries are actually made. The monitoring gets done. The shortfalls get identified. And the community only pays when value is actually recovered.
It's the accountability model that Michigan's program lacked — and that Missouri communities can put in place today, without waiting for a legislative fix or a policy overhaul.
The same pattern, coast to coast
Michigan is the most recent high-profile example, but it is far from the only one. The accountability gap the Mackinac Center documented has played out in communities across the country — in states with very different political cultures, program designs, and economic conditions. The common thread is not the type of incentive or the size of the subsidy. It is the absence of rigorous, independent compliance monitoring.
Here is how the pattern has appeared in other states.
Illinois: Hundreds of millions in unverified job claims
Illinois operates one of the country's largest state economic development incentive programs through the Economic Development for a Growing Economy (EDGE) tax credit. A 2019 audit by the Illinois Auditor General found that the state had awarded hundreds of millions of dollars in EDGE credits over a multi-year period without adequate verification that recipients had actually created the jobs they claimed.
The audit found that the Illinois Department of Commerce and Economic Opportunity — the agency responsible for administering the program — lacked the systems and processes to independently verify job creation data. Companies self-reported their numbers. The agency accepted them. The credits flowed.
The Illinois findings were notable not because the program was uniquely poorly designed, but because an independent audit actually looked. Most states never conduct that kind of systematic review. The Illinois audit surfaced a problem that almost certainly exists, in some form, in every state with a comparable program.
Ohio: The JobsOhio accountability debate
Ohio's JobsOhio program — a private nonprofit that administers the state's economic development incentive portfolio — has been the subject of sustained criticism from state auditors and good-government advocates precisely because its private structure limits public oversight.
The Ohio Auditor's office has repeatedly sought access to JobsOhio's financial records and performance data, arguing that the public has a right to know whether the billions of dollars in incentives the organization administers are producing the promised results. JobsOhio has resisted those requests, citing its private status.
The Ohio debate illustrates a broader principle: when accountability mechanisms are weak or absent, the public has no way to know whether incentive programs are working. The jobs may have been created. Or they may not have been. Without independent verification, the answer is simply unknown — and the public is left to take the program's word for it.
Wisconsin: Foxconn and the limits of self-reported data
Wisconsin's $4 billion incentive package for Foxconn Technology Group became one of the most scrutinized economic development deals in recent American history — and one of the most instructive cautionary tales about the gap between promised and actual performance.
The deal, announced in 2017, promised 13,000 jobs at a massive LCD manufacturing facility in Racine County. The state committed to one of the largest per-job subsidy packages ever offered by an American state government. The Wisconsin Economic Development Corporation (WEDC) structured the incentives as performance-based — Foxconn would receive credits only as jobs were actually created.
What followed was a years-long process of revised commitments, renegotiated terms, and dramatically reduced job projections. By 2021, Foxconn had received tens of millions in incentives while employing a fraction of the originally promised workforce. The WEDC's own audits found that the agency had struggled to independently verify Foxconn's job and investment claims.
The Wisconsin experience is a case study in what happens when a deal is structured with performance requirements but the monitoring infrastructure is not built to enforce them rigorously. The provisions existed on paper. The enforcement did not follow.
New York: The Buffalo Billion and the accountability gap
New York's "Buffalo Billion" initiative — a $1 billion economic development investment in the Buffalo region — generated significant controversy when a federal corruption investigation revealed that the contracting process had been manipulated to favor politically connected firms.
But beyond the corruption findings, independent analyses of the Buffalo Billion raised a separate question: were the promised economic outcomes actually materializing? Researchers at the Rockefeller Institute of Government and other independent organizations found that the program's job creation claims were difficult to verify and that the state's own reporting on outcomes was inconsistent and incomplete.
The Buffalo Billion case illustrates that the accountability gap is not just a problem for smaller communities with limited staff capacity. Even large, well-resourced state programs can fail to build the monitoring infrastructure needed to verify that public investments are producing the promised returns.
What these cases have in common
Illinois. Ohio. Wisconsin. New York. Michigan. The states are different. The programs are different. The political contexts are different. But the underlying failure is the same in every case:
Incentives were awarded based on promises. The mechanisms for verifying whether those promises were kept were inadequate. The public absorbed the cost of the gap.
This is not a partisan issue. It is not a question of whether economic development incentives are good or bad policy. It is a question of basic accountability: when public money is committed in exchange for private performance, someone needs to verify that the performance actually happened.
The Mackinac Center's analysis of Michigan made that case clearly. The evidence from other states confirms it. And the lesson for every community that administers an incentive portfolio — regardless of state, regardless of program type — is the same: the deal is only as good as the monitoring behind it.
What communities can do right now
The national pattern is discouraging. But it is not inevitable. Communities that build rigorous compliance monitoring programs do recover value. They do enforce clawback provisions. They do send a clear signal to incentive recipients that the obligations in their agreements are real.
The barrier is usually not legal authority — most agreements already provide the tools needed. The barrier is capacity: the systems, staff, and processes to do the monitoring work consistently, over the full life of each agreement.
For communities that lack that capacity internally, a contingency-fee compliance partner provides a practical path forward. No upfront budget commitment. No recovery, no fee. The monitoring gets done, the shortfalls get identified, and the community pays only when value is actually recovered.
That model is available to Missouri communities today. It is the accountability infrastructure that Michigan — and Illinois, and Ohio, and Wisconsin, and New York — needed and did not have.
The bottom line
The Mackinac Center's analysis of Michigan's subsidy program is a useful reminder that incentives without accountability are just spending. The deals get made. The promises get recorded. And without systematic monitoring, the promises go unverified — and the public absorbs the cost.
That pattern has repeated itself in Illinois, Ohio, Wisconsin, New York, and communities across the country. Missouri communities don't have to repeat it. The agreements are already in place. The clawback provisions already exist. What's needed is the monitoring infrastructure to make them real.