New Michigan Governor Sending Mixed Signals on Film Tax Credit Program

In the debate over the effectiveness of Michigan’s film tax credit 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 tax 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 credit 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.