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New Michigan Governor Sending Mixed Signals on Film Tax Credit Program

1 min readBy: Joseph Bishop-Henchman

In the debate over the effectiveness of Michigan’s film tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. program, observers say that Governor-elect Rick Snyder’s (R) appointment of Rep. Andy Dillon (D), a film credit supporter, as state treasurer may give new hope to the program:

“It’s no secret Andy Dillon supported the incentives and it’s no secret that, whoever the treasurer is, the treasury has to work very closely with the film office for the incentives to work,” said Jim Burnstein, vice chairman of Michigan Film Office Advisory Council.[…]

Burnstein said it will take Michigan five years to develop experienced film crews and build out studios and other infrastructure.

“If we’re in this thing for five years, we’re going to be fine,” he said. “We’ll have a sustainable industry like Louisiana and New Mexico,” he said.

Not likely. The industry will remain in Michigan as long as the taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. subsidies are flowing, but it’s highly-mobile and price-sensitive and will depart as soon as the flow of free money stops. I’m not sure why he cites Louisiana and New Mexico as examples of sustainability, since those two states have some of the most generous film tax incentive programs.

The program, which provides a 42% refundable tax creditA refundable tax credit can be used to generate a federal tax refund larger than the amount of tax paid throughout the year. In other words, a refundable tax credit creates the possibility of a negative federal tax liability. An example of a refundable tax credit is the Earned Income Tax Credit (EITC). to filmmakers, cost taxpayers $223 million in 2009. Supporters point to job creation and ancillary economic activity. That certainly happens, as one would expect from sharply reducing the tax burden on an activity to the point where you’re essentially handing out cash. But it doesn’t pay for the cost of the program.

A bill is pending to cap the program, and there’s occasionally talk of ending it altogether as a few states are doing.