The glitz and glamour of Hollywood certainly are alluring.
It should come as no shock Michigan’s film incentives, which were at one time the second most generous handouts to moviemakers in the U.S., received near unanimous approval when Granholm signed them into law in 2008.
It’s also not surprising CM-Life has published a long history of advocacy for the incentives, including listing Gov. Snyder’s lack of love for the program as a primary criticism during its endorsement of his re-election, as well as this plea of support published shortly before the start of this school year.
Much like Hollywood itself, once one peaks behind the curtain of film incentives, the glimmering starlight fades, and everything appears far less captivating than at the first glance.
Economists across the political spectrum oppose film incentives and with good reason.
The Center on Budget and Policy Priorities, which Wikipedia describes as a progressive or left of center think tank, criticized film subsidies. They noted the subsidies tend to be excessively generous and states are in a “classic ‘race to the bottom’” of giving Hollywood the most free money in exchange for primarily part-time temporary jobs (with the best jobs going to out-of-state workers), which may have been done anyway.
Plus, there is no such thing as a free lunch.
According to the 2010 Michigan Senate Fiscal Agency’s report, Film Incentives in Michigan, for every dollar the state spent on the incentives, it received about 11 cents in return. Taxpayers are forced to foot the 89 cents on the dollar difference.
The conservative-leaning Tax Foundation agreed film subsidies are unable to generate economic growth or revenue, while it criticized the subsidies as effectively being transfers from the many to a government preferred few special interest.
It noted many of the incentive programs lacked any real oversight. In the case of Iowa, the Tax Foundation said abuse occurred in the following ways, I quote:
- A Mercedes and a Range Rover were purchased for producers to keep with film credit funds.
- Not a single film’s expenses were adequately documented. Only two of 18 even submitted receipts.
- Contracts were amended to increase credits after approval.
- Large payments were made to relatives of filmmakers with credit funds.
- Payments were made outside of Iowa, when only payments in Iowa qualified.
Michigan seems to have fared better than Iowa in this department. However, there were still clear perverse incentives within the system as it existed.
For example, the New York Times reported Michael Moore was awarded $841,145.27, while he later served as a member of the advisory council for the Michigan Film Office. Ironically, the film for which Moore received the grant was “Capitalism: A Love Story,” which is critical of similar crony capitalist dealings.
Meanwhile, according to the criteria previously listed on the Michigan Film Office’s website, the film incentives were distributed in a manner with preference given to larger film productions, which presumably are the most politically connected.
The Michigan film subsidies, like all film subsidies, also struggled to create jobs.
The aforementioned Michigan Senate Fiscal Agency report found the millions of dollars spent by the incentives amounted to only 216 full-time equivalent jobs in 2008 and 355.5 in 2009. When measuring the costs of the credits against these hires, the average cost per job was about $190,000. Including the estimated rippling spin-off employment effects associated with film production, this diminished somewhat, but the average cost per job created was still $43,750.
Additionally, in terms of costs, total public/private expenses of the incentives exceeded the net revenues/benefits by $76 million in the program’s three years of existence at that time.
In my opinion, that report was also being generous, as it did not factor the opportunity cost of the film subsidies. In other words, what would happen if those tax dollars were spent on a next best option such as funding roads, schools and/or my personal preference, paying for the full tuition of economics students – all of which surely have demonstrably higher public returns.
My heart truly does go out to the film students who fear they may not have jobs or the same opportunities in Michigan without the continued existence of the film subsidies. I would like to note Michigan did have a film industry before the incentives, and it will continue to do so after their end, though admittedly at a lesser extent.
Still, even if the film industry completely abandoned Michigan, lining the pockets of a few in a specific sector at the expense of the many is not a good policy.
Well, except when the money finds its way to me.
Wyatt Bush is the assistant editor for CMU Insider. You can email him at firstname.lastname@example.org.
Views expressed in opinion and commentary articles do not necessarily reflect the views of management or employees of CMU Insider.