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Movie companies that made films in Michigan last year are expected to get nearly $48 million in tax credits from the state. That’s under a new film incentive program intended to spur economic activity. But while news of film jobs and movie-related spending has generated excitement, there is a cost to these benefits — a cost that may hit closer to home than many of us realize.

“We have a day care and a preschool,” says Michigander Jerry Grubb. “The preschool can be separate. The children that are here every day get pre-school every day — full day care.”

Jerry Grubb owns “Wee Discover Child Daycare and Learning Center” in Waterford, Michigan. He says his business is down a little as people tighten their belts in a tough economy, but Grubb says he faces an even greater challenge now that Michigan’s burdensome single business tax has been replaced by another tax many find even more burdensome: the Michigan business tax and its surcharge.

Jerry says: “With the MBT and the surcharge, … from single business tax to Michigan business tax, my total expense for that went up 324 percent. That’s a large bunch of dollars.” Those are dollars Jerry would rather keep, not just for his bottom line, but for the sake of the children and families helped by his business. “That amount of money I could easily use for giving raises [or] other incentives for employees,” he says. “I could do things with the building, perhaps, that I’m going to hold off on doing. In other words, I’m paying the state the money instead of paying the economy the money.”

And Jerry’s not alone. His brother, Bill, owns an ambulance company in Pontiac. He, too, is feeling the pain of the Michigan business tax. Bill says: “In 2007 under the single business tax, our final tax rested at about $71,000. … In 2008, [by] our estimate, we’ve paid in $115,000. So, $44,000 or so dollars more, … but we’re not going to get a refund. That cash flow, which is the lifeblood of small business, is gone forever because of the MBT.”

An ambulance company and a day care: just two of many Michigan businesses filling the state’s general fund with their tax dollars — money used in part to pay for the film incentive’s refundable tax credits. “Refundable” means the state actually writes a check to filmmakers when the credit is more than the taxes they owe, creating a direct subsidy to filmmakers.

Inevitably, those subsidies do have some benefits, as with a movie called “High School.” The movie was filmed almost entirely in the Howell area, with many scenes taking place at an unused school building there. School board member Wendy Day voted in favor of allowing movie production at the school. “Was it good for Howell?” she asks. “Yeah, it was good for Howell. It dumped $3 million into our community; it gave our schools a couple hundred thousand dollars to put in our general fund; and it also gave our students unique opportunities that they wouldn’t get anywhere else.”

But Day wonders if the purported $3 million for Howell is really worth a tax refund that appears to be at least $5 million, according to published reports and our own discussion with the film’s producer. Wendy says: “It’s a form of welfare in that, yes, for my constituents in Howell, this was a good thing, because our local businesses did very well. But is it fair for the citizens of all the other cities in our state to be paying for Howell to have extra money? … Of course not. Not when they have no say. Not when the government’s dictating that.”

Others might wonder if the film company’s $5 million refund might be better spent on other public services, such as pothole repair. In 2008, the state Transportation Department says it spent just $4 million fixing potholes on 10,000 miles of Michigan highways.

In the meantime, Bill and Jerry Grubb say they face a rough road ahead paying for others to drive in the fast lane. “If you’re giving away tax dollars — essentially not collecting tax dollars because you’re giving things like the film incentive — then somebody is paying for that,” Jerry observes. “And the people that are paying for it are the people who have been doing business here for years, like myself. [We] get stuck paying that.”

“Incredible,” Bill comments. “Incredible to me because for a Michigan taxpayer in the Upper Peninsula or someplace that the filmmakers are not going to, they’re not benefitting from that one iota, and yet they’re paying the tax for it. And for us, a business that’s established in Michigan, that’s providing jobs in Michigan, that’s providing a community service in Michigan, we don’t get that. We don’t get that tax break. We don’t get that tax refund. … I love Clint Eastwood, but I don’t want to subsidize — which is what it is, subsidize — his business of filmmaking.”

Stories like these are often hidden in the glare of Hollywood’s bright lights. But with no end in sight to Michigan’s film incentive refunds, these “unseen” stories deserve some time in spotlight.

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Kathy Hoekstra is a communications specialist for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.