On July 14th, the IRS held a public hearing for the debt-equity rule (section 385 of the IRS code) that the Treasury Department proposed last April. The hearing, which had as many as 16 speakers from various industries,...
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- New York Times Tells the Tale of Michigan's Bankrupt...
New York Times Tells the Tale of Michigan's Bankrupt State-Backed Film Studio
Today's New York Times has a lengthy piece about a film studio in Pontiac, Michigan, that recently went bankrupt and will bring part of the state pension fund down with it. The Times walks through the story from the beginning, starting with then-Gov. Jennifer Granholm (once an aspiring actress) desiring to make her state the next Hollywood and offering what became a 50% tax subsidy for film production in the state, followed by the decision of a group of investors to build the studio backed almost entirely by expected revenue from subsidized productions, the decision of new Gov. Rick Snyder to turn off the tax spigot to one of America's most profitable industries, and the subsequent default of the studio which for some reason had its bonds guaranteed by the state public employee pension fund. The investors walked away without a shred of obligation: a case of private profit, public risk.
(We are also briefly mentioned in the article as a voice warning that the whole thing was a bad idea.)
The piece is excellent but I thought one of the commenters captured the sentiment best:
I can only praise Gov Snyder for ending this ridiculous subsidy for the film industry. It was nearly a 50% subsidy. Should the government pay for half the cost of making a refrigerator too? I am sure the refrigerator industry would like it. Economists know that no such enormous multiplier effects exist for such subsidies. Only those receiving the subsidies and their accountants can create numbers showing big returns.
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