2008 House Bill 5841 (Facilitate and authorize tax breaks for Michigan film production )

Public Act 77 of 2008

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Introduced by Rep. Andy Meisner on February 28, 2008, to authorize a Michigan Business Tax credit of up to 42 percent of a film studio’s expenses for shooting a film or TV show in Michigan. The credits would be refundable, so if their value exceeded a studio's tax liability the state would send them a check.
- Referred to the House Commerce Committee on February 28, 2008.
  - Reported in the House on March 11, 2008, with the recommendation that the substitute (H-1) be adopted and that the bill then pass.
- Substitute offered in the House on March 12, 2008, to replace the previous version of the bill with one that revises details but does not change the substance of the bill as previously described. The substitute passed in the House by voice vote on March 12, 2008.
- Amendment offered by Rep. Andy Meisner on March 12, 2008, to clarify a provision establishing compensation to employees of individuals under a personal services contract as one of the factors in determining the size of proposed refundable tax credits. The amendment passed in the House by voice vote on March 12, 2008.
Passed in the House (108 to 0) on March 12, 2008. [Vote Details and Comments]
Received in the Senate on March 13, 2008.
- Referred to the Senate Commerce & Tourism Committee on March 13, 2008.
  - Reported in the Senate on March 19, 2008, with the recommendation that the bill pass.
Passed in the Senate (37 to 1) on March 20, 2008, to authorize a Michigan Business Tax credit of up to 42 percent of a film studio’s expenses for shooting a film or TV show in Michigan. The credits would be refundable, so if their value exceeded a studio's tax liability the state would send them a check. [Vote Details and Comments]
Signed by Gov. Jennifer Granholm on April 7, 2008.

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Introduced by Rep. Andy Meisner on February 28, 2008. Passed in the House (108 to 0) on March 12, 2008. New Comment

1) Film subsidies pay off for some like robbery pays off for robber [by Anonymous Citizen on October 16, 2008]
The “Scene” and the Unseen

Tom Long of The Detroit News is a terrific movie reviewer - my favorite - but his Oct. 9 column lends too much credence to those who contend that the state's film incentive boondoggle is a worthwhile expenditure of taxpayer dollars.

Long's piece is titled "Michigan's movie role pays off." If the words "for some" were added to the end it might be true, in the same sense that bank robbery pays off - for the robber. The analogy doesn't quite hold, though, because in this instance those absconding with the loot were invited into the vault by the bank's employees.

State officials, desperate to look like they're "doing something" about Michigan's economic slide, are throwing every kind of discriminatory tax credit, abatement and subsidy they can at selected businesses and industries. The latest is what amounts to outright cash subsidies to filmmakers in the form of refundable tax credits; if the credit exceeds the producer's tax liability, the state sends him a check for the difference. Some $148 million in credits have already been approved, and currently there's no limit on how high that could go.

Here's part of what Long wrote about the program: "Dan Gearig, owner of Ciao Catering, which has worked on a number of films, is also a big supporter. ‘And I'm not the only one making money,' said Gearig. ‘My produce guy, my meat guy, the linen people are having a field day. There's definitely a trickle effect going on.'"

To be fair, Long also quoted economist Gary Wolfram - an adjunct scholar with the Mackinac Center - giving an opposing view, but overall the column still fell short of recognizing a classic economic development blunder: Acting on the basis of what's "seen" in a program while ignoring the unseen, and so getting a skewed picture of its real effect. In this instance what's seen is the loot spread around by those film producers. Naturally, the beneficiaries think the Hollywood handouts are a fine thing. What's unseen is the effect on the people from whom the loot was taken. In the bank robbery analogy it's the depositors. In this case it's Michigan taxpayers.

Government has nothing to give to one person that it doesn't first take from someone else. Any benefits enjoyed by the caterer Long cites are at least offset by revenue lifted from other Michigan taxpayers - including businesses - to pay for the film subsidies. Worse, the Michigan Film Office bureaucrats don't work for free, and neither do the legislators who debated the film legislation and voted for or against its passage. Calculate in the share they "take off the top" and an honest accounting of the program is likely to show just one result: A net loss for the state.

Also of note is a sidebar in The News describing how the program works: "Filmmakers submit an initial script, the Michigan Film Office judges whether it is appropriate for the state." Is this what art subsidy supporters really want? Requiring artists to prostrate themselves before government apparatchiks who will judge the "appropriateness" of their work? History suggests that politics, bureaucracy and art make poor bedfellows - great works of art aren't born of backroom deals.

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Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and education 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.

http://www.mackinac.org/article.aspx?ID=9873
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2) Free Press on film company giveaways [by Anonymous Citizen on March 31, 2008]
Some forecast gain in state jobs with movie bills
BY DAWSON BELL • FREE PRESS STAFF WRITER • March 31, 2008

LANSING -- The golden age of Michigan moviemaking is set to begin -- awaiting only the signature of Gov. Jennifer Granholm on a package of laws creating what state officials call the nation's most generous financial incentives for filmmaking.

How generous?

An uncontested state Senate Fiscal Agency analysis said the bottom-line cost of incentives for taxpayers for a single movie such as the $150-million production of "Transformers" -- partly shot in Michigan and released in 2007 -- would have been $47 million. And even a $4-million budget flick like suburban Flint native Michael Moore's 2002 hit "Bowling for Columbine" would have cost the state $300,000.

The incentives approved last week by the Legislature include tax cuts and credits, loans and production assistance to lure movie, TV and videogame producers to bring their crews and equipment to Michigan. Buoyed by bipartisan acclaim, Granholm's enthusiastic endorsement and the backing of media figures like Free Press columnist Mitch Albom and actor-producer Jeff Daniels of Chelsea, the legislation sailed through the House and Senate with only one "no" vote.

The key feature of the incentive package is a refundable tax credit worth up to 42% of the cost of production. The size of the tax credit, in many cases, would dwarf any tax liability, the fiscal agency said; the state would write a check to the moviemakers for the difference.

A $100-million movie could be eligible for a subsidy of about $40 million.

That led the fiscal agency to conclude that any additional revenues (say business, income and sales taxes incurred by the production company) "would be unlikely to offset completely, or in some cases, even offset significantly, the cost of the ... credits."

The incentives already have sparked intense interest from the industry.

The state's Film Office Director Janet Lockwood said Friday that 60 scripts have been submitted for review and potential qualification for incentives in just the last three weeks -- since it became clear the legislation would become law. That compares to a pre-incentive pace of about a half-dozen per year, Lockwood said.

"We already have a film in pre-production," she said, "People are pulling shoots out of other states ... and moving them here. We have the best incentives in America, at least for now."

That kind of frenzy -- and its attendant image-burnishing for Michigan -- was the principal rationale for the package.

State Sen. Nancy Cassis, R-Novi, the only legislator voting against the incentives, called the refundable credits "categorically unfair" to business owners socked with big increases under the new Michigan Business Tax.

Gary Wolfram, a former deputy state treasurer who teaches economics at Hillsdale College, said Saturday it would have been far cheaper for the state to just waive taxes for moviemaking altogether.

As tax policy, the refundable credits are "completely nuts," he said.

"We ought to hope this thing doesn't work and nobody makes movies, because if it does work it's going to cost us a fortune," Wolfram said.

Rep. Andy Meisner, D-Ferndale, a lead sponsor, said the dramatic, targeted stimulus is what Michigan needs to break out of the economic doldrums.

"We're in a state of economic crisis. People are looking for immediate answers," Meisner said. "This is an immediate boost. It's very real and more tangible than many of the other things we do."

The movie and TV stimulus package will create jobs in a robust, growing sector of the economy that will more than offset the cost of the subsidies, he predicted.

Tricia Kinley, director of tax policy at the Michigan Chamber of Commerce, said she is skeptical about the claims.

The chamber "applauds anyone who can get a tax cut," Kinley said, "but from our perspective there are a lot of businesses that are here already, slugging it out in a tough economy and paying a lot of taxes."

The entertainment industry is robust, Kinley said, but in Michigan it is dwarfed by other sectors, especially manufacturing, which aren't eligible for massive state subsidies.

According to estimates by the Mackinac Center for Public Policy, a free-market think tank based in Midland, Michigan's share of personal income in the "motion picture and sound recording" industry was about $186 million in 2006 compared with $22.1 billion from "motor vehicle body, trailer and parts" manufacturing.

Michigan's share of the entertainment sector could grow more than fivefold and have a "barely noticeable" effect on the state's gross domestic product, the Mackinac Center estimated.

Boosters of the filmmaking incentive package predict the growth will be more dramatic, helping transform Michigan's economy and its image.

Granholm is to sign the legislation as soon as arrangements can be completed for a formal ceremony, spokeswoman Liz Boyd said Friday.

To read the Senate Fiscal Agency analysis of the movie and TV incentives package, go to http://www.legislature.mi.gov/documents/2007-2008/billanalysis/Senate/htm/2007-SFA-5841-F.htm.

Contact DAWSON BELL at 313-222-6604 or dbell@freepress.com.
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3) Mackinac Center: Film subsidies not the solution [by Anonymous Citizen on March 31, 2008]
Lansing State Journal
"Giveaways to film industry won't pave streets in gold"
Jack McHugh and James Hohman

March 30, 2008

Michigan legislators are rushing to grant extensive refundable tax breaks, government loans and even outright cash handouts to the film industry. Upping the ante from the usual discriminatory tax breaks betrays a tinge of desperation among business subsidy advocates.

The film package is being sold as an economic development initiative, but it's unlikely to have any significant effect on this state's failing economy. That's because Michigan's current gross domestic product is nine times the size of the entire U.S. film and sound recording industry, according to the federal Bureau of Economic Analysis.

A comparison with the auto industry puts this in perspective. In terms of personal income by industry, the entire U.S. "motor vehicle body, trailer and parts" industry accounted for $86.2 billion in 2006. Michigan got $22.1 billion of that, while California's share was $2.6 billion.

The entire U.S. "motion picture and sound recording" industry was a bit more than one-fourth that size: $25.7 billion. Michigan's share was a measly $186 million, while not surprisingly, California got $15.3 billion.

For context, the total personal income for Michigan residents was $341 billion in 2006.

One could look at this state's tiny share of the film industry and rightly conclude there's room to grow. But not even the legislators who voted for the handouts or the governor who called for them can believe Michigan will ever get more than a tiny slice of that industry.

And even if the Great Lakes State somehow managed to garner 5 percent of the nation's entire film production (half-again more than our "fair share" on a per capita basis), our state GDP would increase by a barely noticeable 0.6 percent.

Looking at just the feature-film portion of the industry (the bill seeks to attract TV shows, music videos, sound recordings and more in addition), the Motion Picture Association of America reports 603 movies were released in 2007. To capture 5 percent of that, Michigan would have to attract the equivalent of 30 average-sized productions.

Our chances of meeting that milestone are slim, given that scores of states are also looking to "pick each other's pockets" by using similar tax breaks and handouts to pursue the same Hollywood dreams. Reportedly, the just-passed package puts Michigan in line with the richest of these, offered by New Mexico and Louisiana.

It's not as if Michigan is bidding for a role in a fast-growing industry, either. Film industry growth has been so dismal since 2002 that Michigan's faltering GDP growth rate has actually kept pace with it.

Like all such targeted subsidy and tax-break programs, the main purpose of the film handouts will be to give the appearance of "doing something" while legislators avoid the heavy lifting of passing the broad-based tax, regulatory and labor law reform that would genuinely fix our broken economy.

If they were less star-struck, legislators would finally begin the transformational restructuring and downsizing of government needed to make possible lower taxes for all job providers - not just those who hire movie stars.

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