One of the first features we published at Film Slate Magazine, and certainly one of the articles that has generated the most feedback was on whether the state of Michigan should keep its film tax credit program intact. The article also touched on other states that had passed film tax credits, and how some of the programs were doing.
Michigan passed their film incentives in 2008, with bi-partisan support. I know I won’t be shocking anybody when I say that manufacturing states like Michigan have been hardest hit by the recession. And in particular, Michigan, which depended so heavily upon the auto industry, has been absolutely reeling. Officially, unemployment topped out at just over 14% (although due to the way the federal government keeps track of that statistic, it was much higher), hundreds of thousands of automotive jobs have been lost, dozens of plants have been closed, and the psychological toll all this has taken on the state is incalculable. When the most notorious news item to come out of a state is the continuing sexual and fiscal misadventures of a perpetually incompetent mayor with a Peter Pan complex (yes, Kwame Kilpatrick, if you’re reading from prison, I’m talking about you), you know that’s not good.
That article generated a lot of conversation amongst filmmakers and officials I talked to. I even was contacted by a reporter from Bloomberg Financial News. I didn’t try to make the article lean one way or the other. I just wanted to present the facts, and I think the point that I was trying to make still bears out. It’s always best to leave personal opinions out of a feature like that.
Well, those film tax incentives passed by the Michigan State Legislature in 2008, in the heady days of Democratic Governor Jennifer Granholm’s administration, are the most generous in the country. They offer a 42% tax rebate. That is a big chunk of a budget that can be offset. As long as you spend the minimum spelled out by the guidelines of the Michigan Film Office, filmmakers who set up shop in the state could have checks cut and made out to them.
It’s three years later, and Rick Snyder, a Republican, is governor now. The state’s financial outlook hasn’t changed much. One time federal stimulus money that was used to patch a gaping, multi-billion dollar hole in the budget is gone. Snyder, a venture capitalist by trade, campaigned on the fact that he would look at the state as a corporation, and come budget time, he was going to look at every item, and perform fiduciary surgery if necessary. Well, he has presented his budget, and it's not looking good for the film tax incentives.
It has never been disputed that the film tax incentives worked. 131 productions have completed production in the past three years. A recent study from Ernst and Young shows nearly $6 of economic activity for every $1 spent. That’s a pretty hefty return on investment. Several thousand full time jobs have been created, and a few full time studio facilities have been built, which was one of the hopes for the program—a sustainable, in-state film industry. Money goes to construction, caterers, and various other service industries.
The problem, according to government officials, is that you can’t compare economic activity to money that’s coming directly out of the budget. It may seem simple. Money is money, right? It turns out, no. It’s true that hundreds of millions were paid out between 2008 and 2010 from the Michigan coffers. Some say it’s not a tax incentive, but a subsidy. Snyder’s plan calls for reducing the incentive, and capping payouts at $25 million. There’s some debate about whether he started with a $100 million figure, but it turns out he meant taking care of existing projects.
As this issue hangs in the balance, some productions are already pulling the plug on filming in Michigan. Uncertainty is not good for the film industry. Marvel is taking “The Avengers” elsewhere. It’s also rumored that Christopher Nolan’s latest Batman movie, “The Dark Knight Rises,” which was looking at filming in the state, may be going elsewhere too. So far, only two out of the 20 movies that have applied for the credit have been approved this year.
It’s fairly simple. If you cut the rate from 42% to anything around 25%, or cap the payouts at $25 million, you’re going to halt any progress that Michigan has made with the industry. States like Louisiana will be more than happy to pick up the slack. If you return Michigan to the middle of the pack, then who cares?
I’m not for blindly throwing money away, especially in the case of Michigan (my home state, by the way, so I’m a little more than interested in what happens), because the state faces such financial difficulty. Is it a debate about financial philosophy? Possibly. I don’t consider myself Republican or Democrat. Conservative or liberal? The only label I’m worried about is that my toothpaste from China had better have extra melamine.
But after three years, I think it’s too soon to alter the program drastically. The film business has shown phenomenal growth, and the potential for a sustained industry is possible. It’s never going to replace Big Auto. Those days are gone, and that was never the plan anyway. But the program works. I thought Republicans liked trickle-down economics, and that’s what happens when these productions come to town and spend money.
