With Governor Granholm’s support, both houses of Michigan’s legislature recently approved creation of a tax credit to offset the energy costs of Hemlock Semiconductor, a company seen as key to the state’s high tech future. The tax credit proposal is now attached to state energy policy legislation that is still pending.

Hemlock, a joint venture of Dow Corning and two Japanese firms, manufactures polycrystalline silicon for solar cells and for electronics, and its 30-40% annual sales growth has driven rapid growth in production capacity. Site Selection recently ranked Hemlock’s $1 billion expansion in Saginaw County—the third in three years–as one of 2007’s top ten business deals.

The 12-year tax credit, which the energy-intensive firm wants to defray Michigan’s “uncompetitive” energy costs, is Hemlock’s price for further expansion in the state. It would be expensive, costing the state $357 million, or an estimated $900,000 per job for the 400-500 jobs projected for Hemlock’s next expansion.

The proposed credit is also “fully refundable,” i.e., it becomes an outright payment from the state’s general fund in years when Hemlock’s Michigan tax bill is too low to take the full credit.

Even in Michigan circles favoring lower business tax rates, the company-specific handout has had some critics. The Republican chair of the senate finance committee, Nancy Cassis, fears the credit could “put a hole in the state’s budget” and add to the burden of “all companies not as large as Hemlock Semiconductor that are the backbone of our communities.”

Russ Harding of the Michigan-based Mackinac Center for Public Policy, a free-market think tank, also decried the proposed credits: “We gave them incentives to get them here. Now they’ve got leverage and say they’ll leave without more incentives. Where does it stop?”

It’s hard to say. In fact, the new subsidy would come soon after Governor Jennifer Granholm’s approval of “anchor zone” tax breaks for Hemlock, to be based on jobs created by silicon “wafer” manufacturers that locate in a zone around Hemlock’s Michigan plant.

One blogger noted these incentives are “part of a master plan to turn Michigan into a high-tech nirvana, where a few hundred jobs here and there will supposedly make up the shortfall created by the thousands of manufacturing jobs that have already left the state.”

Meanwhile, the legislation does not require Hemlock to create a definite number of jobs or maintain a specific level of investment in its next Michigan expansion, or to repay state incentives if it does not.

Ironically, the proposal to underwrite Hemlock’s intensive energy consumption is now linked to energy legislation that, while promoting more power plant construction, would also set tougher energy efficiency standards for Michigan business. 

Fans of Big Brown are probably still in shock at the colt’s disappointing performance Saturday in the Belmont Stakes, which put an end to a widely anticipated steroid-enhanced gallop to a Triple Crown victory. The majority owners of the thoroughbred are looking for a consolation prize—at taxpayers’ expense.

Newsday reports today that International Equine Acquisitions Holdings Corp. (IEAH), a racing conglomerate and hedge fund that owns a big piece of Big Brown as well as dozens of other race horses, is seeking a property tax break worth at least $1 million in connection with its plan to build an “equine care medical facility” in Nassau County, New York near the Belmont track.

The Town of Hempstead’s Industrial Development Agency is considering a proposal that would reduce property taxes on the $17 million horse hospital through a sale-leaseback arrangement. While many of these deals go through unopposed, there is already some dissent on the IEAH plan coming from the public official whose job is to oversee property taxes. Nassau County Tax Assessor Harvey Levinson told Newsday that he objected to the idea of giving a tax break to the wealthy Wall Streeters who invest in IEAH. “The investors should gamble with their own money,” Levinson was quoted as saying. “The facility should not be removed from the assessment rolls and further erode the tax base…forcing homeowners and small businesses to pay more than their fair share of property taxes.”

One of IEAH’s investors responding by saying: “If it brings jobs, brings revenues and ultimately more taxes than the abatement…I don’t think it matters how wealthy are the investors.” According to Newsday, the facility would employ from 8 to 13 workers. It’s not clear how many of those would involve emptying equine bed pans.