State Legislators Need All the Facts on Film Subsidies

(Editor's note: The House Tax Committee and House New Economy and Quality of Life Committee will hold a joint session at 9 a.m. today in Room 352 of the State Capitol Building. This text was e-mailed to all members.)

Dear Joint House Committee Members:

It has come to my attention that you will be meeting today to discuss the Michigan film incentive program. As you consider the testimony and documents presented by various parties, be advised that certain items with seemingly pristine pedigrees may be deeply flawed.

For example, a Michigan State University film subsidy "impact" study (funded by the Michigan Economic Development Corp.) published last winter had some merits, but these are overbalanced by the fact that its model excluded 100 percent of the costs associated with the program. This is analogous to an accountant leaving the liabilities off a company's balance sheet and concluding it has a high net worth. (For details refer to "Special Effects: Flawed Report on Film Incentives Provides Distorted Lens," published by the Mackinac Center.)

A valid study would have shown not only the program's costs, but also would have recognized how the higher tax burden those costs impose may contribute to Michigan job losses, especially since this film subsidy program came hard on the heels of the October 2007 $1.4 billion tax hike. Including such costs would not only be more intellectually honest, it would help make the program more transparent.

One more thing: It's confusing and misleading to refer to this as a "tax credit" program. It is in fact a cash subsidy in the form of a tax credit program. Sadly, the Michigan Film Office's secrecy prevents us from calculating the amount of cash subsidies vs. tax breaks. At least one Senate Fiscal Agency analysis, however, suggests they are largely cash handouts.

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.