This piece originally appeared in Crain’s Grand Rapids Business on May 15, 2024.

To steal a line from the 1986 movie Poltergeist II: The Other Side, “They’re back!” Lansing politicians are restoring, with slight modifications, a film subsidy program that previously robbed Michigan taxpayers of $500 million. The new proposal authorizes $2 billion over 10 years.

This time, proponents say, will be different than the last. Why? Because the film credits, which cover up to 30% of a production’s expenses, are transferable.

But the previous law permitted transferability as an option, too, and the program still failed. Evidence from other states shows that transferability makes little if any difference in performance.

The legislature should stop this proposal at its first opportunity.

Research by state governments, academics and economists around the nation demonstrates that subsidizing Hollywood is ineffective at helping the economy or state treasury. The state of Michigan alone conducted or bought three such studies of its past film and television production efforts.

Two of Michigan’s own studies found the state’s film program to be a net negative for the Michigan treasury. The report from the non-partisan Senate Fiscal Agency showed the film production incentive lost 89 cents for every dollar spent. A third study did find a positive impact, but that study couldn’t be taken seriously because it ignored 100% of the subsidy costs. The real world costs real money. These programs siphon off scarce resources that might be spent fixing roads and bridges.

At least ten other states, including Louisiana and New York, have done analyses and found their own programs to be net losers. New York’s analysis, released last January, showed taxpayer losses as high as 85 cents on the dollar.

Sophisticated analyses of film subsidy programs in peer-reviewed journals repeatedly demonstrate little if any positive impact on the economy, employment or wages. One 2019 Georgia-specific study found that if all film jobs in the Peach State could be attributed to its film subsidies, each would have cost taxpayers between $64,000 to $119,000 per year. That’s hardly a cost-effective way to facilitate growth.

Georgia is an important state to consider for two reasons. It operates the most expensive film program in the nation. Subsidy watchdog Good Jobs First reports that the state dedicates about $1 billion per year to the program. If film incentives don’t work at $1 billion a year, what makes Lansing politicians think they would be competitive at smaller amounts?

Georgia’s 30% tax credit like the new one proposed for Michigan, is transferrable. Nevertheless, Michigan proponents argue that allowing producers to sell, or transfer, tax credits makes their proposal different and better. It makes scant difference in terms of performance. Georgia taxpayers are still losing their shirts, or at least having their shirts transferred to a favored few.

All transferability does is mask the route cash takes from taxpayers to producers. And that obscure route brings steep costs. Credit buyers typically demand discounts to acquire them. The transferability argument just allows proponents to redirect legitimate criticism from past film subsidy failures.

Lawmakers should not pass this proposed legislation into law. Taxpayers deserve better.

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.