Michigan Debates Expensive Film Tax Credit Program

January 18, 2010

Michigan’s generous program of paying cash rebates to filmmakers who film in the state has been successful at getting filmmakers to take the money. It shouldn’t be surprising that giving people cash and essentially wiping out their tax liability results in lots of increased economic activity. The real question is why Michigan wants to do this just for the film industry and not for everyone.

They may have to answer that question sooner rather than later. As we document in our new report on film tax credits, some states are bidding up their generous motion picture incentive packages to become even more generous, meaning other states need to basically write blank checks or be out of the competition. That can be a bitter pill to swallow, but sometimes you just have to throw in the towel, use money for other things, and enjoy the benefits of movies subsidized by your neighbors.

From RealFilmCareer.com:

Michigan faces an ongoing state budget crisis — estimates say the shortfall could be $1.6 billion this year — and some lawmakers have called for a cap or repeal of the incentives.

“The nonpartisan economists even agree that the film credit program is extremely costly and is failing miserably, costing the state $100 million more than it brings in and costing families about 7,500 full-time jobs from the private sector,” state Rep. Tom McMillin, R-Rochester Hills, said in a statement last week.

“The numbers are not adding up to job creation as promised. The state will take $100 million out of businesses in 2010 to pay for things like out-of-state actors’ salaries and expensive dinners. That means less money for existing businesses to hire new employees or keep existing ones,” he said.

McMillin introduced a bill in August to repeal the credits, but it hasn’t emerged from the commerce committee.

Incentive opponents may get a boost from a national report issued last week by the Tax Foundation, a nonprofit Washington, D.C.-based think tank on government tax policies, that’s critical of industry-specific tax breaks and suggests states would see wider economic benefit if they were repealed.

From the Detroit News:

The Tax Foundation says star-struck states like ours, boasting about their film credits, are engaged in “a contest of who can funnel the taxpayers’ money into the film industry fastest.”

Our film tax cuts will cost state government $98 million this year and $120 million in the 2011 budget year, when it faces a $1.6-billion revenue shortfall. The state also provides hundreds of millions in tax breaks to an array of other industries.

We can’t afford to end the program when we are so desperate for jobs, but our financial plight is making it harder to sustain. That makes it urgent for lawmakers to figure out a sustainable method of keeping Michigan attractive to filmmakers.

With Michigan so determined to pour its tax dollars into filmmakers’ pockets as the state falls apart, other states should be wary of taking them on.

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