Film Subsidy Bucks Buy Video Games: Does Hollywood Glitz Still Shine?

Although celebrities like Clint Eastwood and Michael Moore have grabbed the headlines for Michigan’s controversial film tax subsidy, taxpayers are likely unfamiliar with the program's newest recipients.

Surprisingly, video game company executives are getting in on the 42 percent tax incentive program.

Michigan taxpayers have given two companies a combined $1.3 million in tax subsidies to make three video games. In August, the Michigan Film Office awarded Scientifically Proven Entertainment $411,650 to make “Ghost Game.” The state also gave BH Golfing Games $912,000 in 2010 so it could create two video games.

Attention paid by local media when Hollywood stars come to their town is evident in news reports. For example, a freelance reporter from AnnArbor.com asked George Clooney this month at a film festival what he thought about filming in Ann Arbor. Clooney’s response: He liked the town.

This actually became a story on AnnArbor.com.

“The media is just as star struck as everyone else is when George Clooney comes to town,” said Kathy Hoekstra, an investigative journalist with the Mackinac Center for Public Policy who has interviewed celebrities. “George Clooney is not going to bite the hand that feeds him. He is an actor who is an expert in public relations. It would be ridiculous to think that George Clooney would have anything other than a fawning reply about Ann Arbor when speaking to that reporter.”

The Federal Reserve Bank of Minneapolis, which releases an annual report on film subsidies, described in one of its publications the lure of film incentives for taxpayers: “Call it a movie trailer for economic development: A film production company comes to town with its director and stars, spends a lot of money on lodging and food, hires locals as crew and extras. Residents run into their favorite stars at the local coffee shop, and the location is seen by millions of viewers on the big screen — a great boost for tourism.”

But who will fawn over a CEO of a start-up computer game company in Farmington Hills?

“Video game development and production have always been a sector we want to attract and grow in the state,” said Michelle Begnoche, spokesman for the Michigan Film Office, in an email.

But the video game industry offers none of the high-profile media exposure of a major motion picture.

“It’s pretty clear that the film incentive does not create jobs,” said Michael LaFaive, director of the Mackinac Center for Public Policy’s Morey Fiscal Policy Initiative. “Whether or not we are spending too much on ‘coolness’ is a debate we covered as well. What is clear is these video games are just another business. The market will create jobs. They just may not be in categories that the politicians want to brag about."

Other experts question the value of targeted tax incentives and subsidies.

Peter Calcagno, an associate professor of economics at the College of Charleston and the director of the Initiative for Public Choice & Market Process, wrote in an email that he’s “yet to find any convincing economic evidence to suggest that these types of policies are generating any real economic growth.”

In the book “Unleashing Capitalism: A Prescription for Economic Prosperity in South Carolina,” Calcagno listed nine different studies on tax incentives done from 1989 to 2007 that found little or no evidence the tax incentives worked.

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