The Michigan Film Tax Credit - a drop in the bucket

Did you know Michigan is the least expensive state in the country to make a movie right now? Part of the reason it's inexpensive to film here is a tax credit, approved in April 2008, giving movie makers a 42% refund for every dollar they spend. 41 of the 50 states have film tax credits, and last year Michigan's became among the best.

A recent WXYZ Detroit poll on the state film tax credit revealed 70% of Michigan people support it (only 21 % disapprove). There is a lot of bad news these days, and movies help us forget about the bad news. Today in Michigan we have car companies going bankrupt, the highest unemployment in the nation, people moving out of the state, etc.. Movies are fun, and they're a good business, even in bad times. The movie industry is around a $60 Billion dollar business.

There was some “good news” about Michigan recently - the state just earned a AA- bond rating. This means we have a good credit rating, because we balance our budget. Michigan spends about $44 Billion a year which is the same as we receive a year in funding from the taxpayer and other sources. The state of Michigan's debt rating is one of the best in the country - yet our economic plight is among the worst - ironic don't you think?

California recently increased its film tax credits to stop movies from leaving the state for locations like Michigan.

Last year Governer Arnold Schwarzenegger said he would star in Terminator Salvation if it were filmed in California. The movie was filmed in New Mexico instead. Like Michigan, New Mexico has an aggressive tax credit.

Nancy Cassis, the Michigan Senator who chairs the State Finance Committee, receives credit for the state's AA- bond rating. Senator Cassis is also almost single handedly leading the effort to put a limit on the Michigan film tax incentive. Senator Cassis has a nickname among Michigan Film Industry professionals - The Filminator.

It seems wasteful that Senator Cassis would spend her time (our money) in this endeavor for three reasons. The first is that Governer Granholm will not reduce the credit while she is in office - she will veto. The second is the cost of the tax credit relative to total state spending is less than ½ percent. The third is that her argument for reducing the credit centers on economic payback, yet most of the state spending pays back even less.

Senator Cassis knows rumors Michigan's credit might be cut could result in filmmakers choosing another state. That would make her job easier in balancing the states double A- budget next year. She knows Governer Granholm will veto, but she might be able to accomplish her goal anyway by convincing Hollywood film makers Michigan's competitive credit could be on its way out.

Michigan is planning to spend $44 Billion in 2010 and the state is projecting a cost of .2 Billion for the film credit. Think about these numbers another way. You have $100 in one pocket and 50 cents in another. Relatively speaking, the film tax credit is equivalent to the 50 cents. I want to know how the other $100 is spent, how about you?

Well, over 80 % of the state spending is in Healthcare $13 B, Public Schools $13 B, Social Services $4.6 B, Government Payroll $3.2 B, and Department of Corrections $2 B. Other spending categories include agriculture, energy, economic growth, judiciary, transportation, and a few more. The Pie Chart demonstrates this picture. The very narrow yellow slice of pie represents the film tax credit.

While state payouts to film projects are easy to tally, it is difficult to total the money spent in local communities during film production. It is not unusual to have 200 people shooting a movie on location for a month or more. There are local wages, hotel rooms, dinners in restaurants, and local shopping sprees. The state of Illinois recently reported income of $47 Million from filming this summer's $100 Million blockbuster Public Enemies, half of which went to salaries in the state and the other half to local businesses.

The goal of the film tax credit is to develop local infrastructure over time and that is exactly what's happening. In early 2009 there have been multiple press releases announcing Michigan investments in film production. Motown Motion Pictures, S3 Studios, Unity Studios, Newcastle Entertainment, Paralax, and 23rd Street Studios represent investment in excess of $350 Million, and most of these businesses are now hiring local people.

Additionally, large budget Hollywood films are hiring Michigan temporary workers. These people are learning the craft with seasoned film professionals and many will go on to permanent positions in local production companies. Louisiana enhanced its film tax credit in 2005 and local production expense as a percent of total has grown from one third to over 80%.

Nancy Cassis states "the film credit does not pay for itself. We have to rob Peter, the hard-working Michigander, to pay Paul, the Hollywood tycoon. To fund these millions of dollars in payouts, we must use money from the state's General Fund budget--and in turn reduce some other budgets. Which budgets are we going to cut by $110 million?"

Well, how much dollar for dollar payback does the state receive for Healthcare, Social Services, Government Payroll or Department of Corrections? Common sense indicates these are not economic growth formulas and that Finance Committee time would be better spent focusing where 80% of the money is spent (i.e. the 80/20 rule).

Nancy Cassis and the state Finance Committee are employed by you and I, the taxpayer. Let's force them to spend their time efficiently in our best interest. Let's focus them on priorities that serve us, not individual political pursuits. Instead of giving them accolades for good budgeting, while unemployment is the highest in the country and there's a mass exodus from the state, lets force them to accept their public service responsibility - financing the public good, with a focus on economic growth. Let's make them accountable for chasing the elephants not the mice.

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