Blog: Rob Cleveland

Rob Cleveland knows what it takes to build something out of nothing. A former auto biz writer, he not only grew ICON Creative Technologies Group into a successful 30 person firm, he recently opened the Grange Kitchen in downtown Ann Arbor. Rob believes in the value of tax incentives, and explains how they'll help Michigan develop much-needed entrepreneurs like himself.

Rob Cleveland - Post No 1: Tired of being number one? Tax incentives have to stay.

The State of Michigan always seems to find its way to the top of lists we all wish didn’t exist. Lately it is the national unemployment list driven largely by the meltdown of the domestic car business. In an effort to try and staunch the bloodletting, Michigan has spent considerable dollars to incentivize businesses to build jobs here in Michigan.

ICON began looking at the State of Michigan’s MEGA tax credit for high-tech jobs in late 2007. The program isn’t widely advertised, but regional and local business publications almost always pick up reports once the credits are issued, representing the best way for companies to compare themselves with those issued tax credits and decide if they should apply.

Few companies are forecasting major growth plans now compared to this time two years ago, but those who are recognize that Michigan’s Business Tax is a big impediment, so much so that outsourcing or hiring contract employees often is a better option. ICON faced that dilemma, knowing that it would have to continue to staff up through 2009 to meet growing demand, and the tax credit seemed like a good option to take the pressure off of full-time employee commitments.

The process began with Ann Arbor Spark who reviewed our business plan and our model for growth over the next five years. From there, representatives from the Michigan Economic Development Council (MEDC) also interviewed the company principles, and ultimately approved the application.

Key factors in having the application approved were the ability to demonstrate a strong business plan and then graft that plan into the structure that allows MEDC to make an overall assessment. The tax incentive program was originally designed to instigate more manufacturing jobs and as a result, the application and the review process have a corollary focus: wages and capital equipment investments are chief concerns rather than salaries and benefits.

But once the case is made, and the MEDC approves the application, a formal approval process takes place in Lansing, and tax credits are put in place. The good news for businesses just starting the process: the program doesn’t start until you are ready. So if the first year doesn’t meet the minimum expectations, the program can begin a year later.

ICON hit its target growth for 2009, and the tax credits definitely played a roll in our decision-making process. In some cases, where contractors or out-of-state developers were available, we chose instead to hire on full time, in part to meet our targets and qualify for the credit. In the end, the fiscal offset probably doesn’t net ICON a significant return, but full time employees almost always prove to be more effective than outside help. These days in particular, people hired on full time with benefits see themselves as extremely fortunate.

There is mounting pressure to cancel these types of tax credits and other incentives to drive up employment here in Michigan. Those who advocate eliminating these incentives must have solid jobs or trust funds and certainly aren’t in the business of running a business. Employers here are finding any edge they can to cut costs, and with labor representing the biggest expenditure for most companies, it is the easiest place to look.

If Michigan doesn’t find innovative ways to reconstitute its job base, we can look forward to many more years of being…number one.