Successful Film Incentive Would Drain Entire Treasury

In response to a question from Jon Boguth in Time on what makes Michigan's existing businesses less worthy of tax relief than film producers, Gov. Jennifer Granholm responded, "You can't give tax credits to everybody, because somebody's gotta pay for them." It's a clear admission that the program is not costless. And because the film incentive is so generous, the costs of "success" would be massive.

According to the federal Bureau of Labor Statistics, the entire U.S. film and video production industry provides 206,900 jobs, with more than half of them in California. Last year, Michigan's film subsidies dished out $48 million in incentives, which generated the equivalent of 254 full-time, all-year jobs. If the subsidies succeeded in transplanting the entire California film industry to Michigan, the cost to taxpayers would be $21.3 billion — more than the state government collects from all its taxes combined.

That may be all right if attracting this industry doubles the economic size of Michigan. It won't. Not even close — if all of the California film industry jobs came to Michigan, the state would replace only about a third of the jobs it lost in just the last year.

And while there are employment multipliers that may increase the number of jobs associated with the film industry, there are going to be multipliers on the cost side as well. "Somebody's gotta pay for them," as the governor states, and the economic costs of replacing the entire treasury would be substantial.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.