Commentary: Film Tax Credits

May 25, 2012

Well, we are heading into the holiday weekend, and if the weather holds up, many of us will be barbecuing or going out on the water. But some of us will be going to the movies.

And your odds of seeing a major motion picture made in Michigan are a lot smaller than they were a few years ago.

That’s because the film incentive established by the Granholm Administration ended when Rick Snyder became governor and Republicans took over both houses of the legislature.

The governor doesn’t believe  special exemptions and tax credit deals are good policy, and you can see logic in that. But there is always an exemption that proved the rule, and the film industry credit was one of those.

Frankly, I can’t tell you whether the generous breaks we granted the film industry were a net economic plus or minus for Michigan. I have seen studies that came to opposite conclusions.

My guess is that it probably cost the state a little more than it gained financially in the short run, but had the potential to be a huge economic plus in the not-very-long run. But analyzing this from a purely financial perspective misses something.

I’ve been in this state a long time, and I can’t ever remember anything that got people as excited. They went to see films being made, and volunteered as extras. People got an extraordinary kick out of seeing Clint Eastwood on the street or Jack Nicholson in a restaurant. When a film was released that was shot partly in your neighborhood, you went to see it regardless. This was a big deal.

Well, what was an open-ended tax credit was slashed to $25 million in incentives under the new governor. Hollywood promptly pulled up stakes and left, in the process hurting a lot of Michigan businesses who serviced the film industry.

Now, there is  vague recognition in the legislature that we’ve lost something. The state senate wanted to boost the amount available for the film industry to $100 million; eventually, they compromised at $50 million. Some people were excited about this yesterday, and spoke as though this meant that the filmmakers will be back.

But I’ve got news for them: They won’t be. Oh, a few more independent small films may be made here. But don’t expect Meryl Streep to show up, or another Gran Torino to be made.

And here’s why. Republicans should remember an important principle they knew when they reformed the corporate tax structure. Businesses like lower taxes. But they really value stability. They have to know their fixed costs, and be able to expect they’ll remain consistent. You can’t do business in a place where you constantly worry the legislature may pull the rug out from under you.

If we are serious about bringing the film industry back, we need to restore some kind of open-ended tax break and guarantee it would stay in place for a decade. Then, they might think we meant business. If there’s anything this state needs, it is an exciting new industry that gives young people some incentive to stay here.

Even if the film industry itself turned out to be a long-term loss leader, my guess is that restoring its credits would be well worth it.

Jack Lessenberry is Michigan Radio’s Political Analyst. Views expressed by Jack Lessenberry are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, the University of Michigan.