Film industry tax incentives generated nearly 3,000 'indirect jobs' in 2010, study finds
The debate over the sustainability of Michigan's film industry tax incentives is heating up with the release of a study concluding that the incentives generated more "indirect jobs" than the film companies generated themselves.
The study, conducted by accounting firm Ernst & Young and paid for by groups that advocate in favor of the film incentives, found that film companies hired the full-time equivalent of 1,039 workers in 2010. During the same period, Michigan businesses that service the film industry — in industries such as food services, hotels and equipment rentals — hired the full-time equivalent of 2,822 workers. In 2010, film companies cashed in on $117.2 million in state tax incentives.
In 2009, film companies received $73 million in incentives and hired the equivalent of 797 full-time workers directly, the study found. During the same period, Michigan businesses that service the film industry hired the full-time equivalent of 1,834 workers as a result of business gained from the film industry.
The study also found that the tax incentives translated into $19.5 million in state and local taxes paid in 2009 and $30.9 million in 2010. Those figures include estimates of the amount of taxes non-film companies paid as a result of additional business they gained from film companies.
The study was paid for by the convention and visitors bureaus in Ann Arbor, Detroit, Grand Rapids and Traverse City. Those groups support the film incentives because they boost the travel industry.
If this study's figures are correct, the state spent about $27,746 for each direct or indirect job created in 2009 as a result of the film incentives. In 2010, that figure was $30,362.
Although the film incentives result in a net loss in tax revenue, advocates argue that the job creation and the film industry's attractiveness to young people made the incentives worthwhile. Opponents say the state can't afford to issue aggressive tax incentives to specific industries.
The Ernst & Young study contradicts a September report by the nonpartisan Senate Fiscal Agency, which found that the state spent $44,561 per job in the 2009-10 fiscal year. The Senate Fiscal Agency reported that economic activity by film companies and other businesses that benefited from the film industry accounted for 1,542.2 full-time jobs in Michigan in the 2009.
The contradicting studies add fodder to the debate over Gov. Rick Snyder's proposal to eliminate the state's unlimited film tax incentive and replace it with a capped pool of $25 million dedicated to the industry.
Companies and film productions that have already received film credits would get to keep them.
Michigan's film incentives program, approved in spring 2008, provides a cash refund of up to 42 percent of the amount a filming company spends in the state. It's considered one of the most aggressive film tax incentives in the country.
Contact AnnArbor.com's Nathan Bomey at (734) 623-2587 or nathanbomey@annarbor.com. You can also follow him on Twitter or subscribe to AnnArbor.com's newsletters.
Comments
Veracity
Wed, Feb 23, 2011 : 4:40 a.m.
1bit: Well, I guess if the state does not want the $50.6 million left by the movie industry last year then I will be happy to take it! Should the state of Michigan refuse any sources that will provide additional money for its economy?
1bit
Wed, Feb 23, 2011 : 1:19 a.m.
Oh, and remember, the budget calls not for eliminating the credit but capping it to $25 million or thereabouts. For benchmarking, the Pure Michigan campaign (also to be funded at a similar level) brings in over $2 for every dollar spent.
1bit
Tue, Feb 22, 2011 : 11:31 p.m.
Veracity and A.J. Clock: Okay, I took the time to read the document and it is mostly statistical mush. The only numbers that really matter are: what did the movie company spend in the State of Michigan and to Michigan residents and what was the amount paid by the State of Michigan back to the movie companies: In 2009: $101.5 million versus $73 million in credits or, in the vernacular, $1.39 for every dollar spent. In 2010: $167.8 million versus $117.2 million in credits or, $1.43 for every dollar spent. However, unless I saw the actual data of what was spent in Michigan, I would be very skeptical of the numbers in the study.
Edward R Murrow's Ghost
Tue, Feb 22, 2011 : 8:13 p.m.
Veracity wrote: "If the movie industry leaves more money in the state than it takes out of the state then how can Michigan lose?" Applying this logic, the state ought to take that $100 million it has given away to Hollywood and use it to build roads, hire cops and firemen, etc.... because EVERY dime of that money will stay in the state. Good Night and Good Luck
Veracity
Tue, Feb 22, 2011 : 6:14 p.m.
If the movie industry leaves more money in the state than it takes out of the state then how can Michigan lose? The movie industry has money to spend and will search out appropriate filming locations that are most economical. For whatever reasons, Governor Snyder wants the movie industry to understand that we only want a little bit of their money. I wonder why he is being so picky but I expect that other states will treat the movie industry differently.
Craig Lounsbury
Tue, Feb 22, 2011 : 5:38 p.m.
If the state of Michigan would cut me a check for 42% of the yearly cost of being Craig I would hire somebody to mow my lawn and shovel my driveway. I'd also spend more money at the local watering hole while my lovely wife was spending more money at DSW. Its what I call a win win. I win because I have more discretionary income to spend. The local economy wins because old Craig is pumping money in to it and hiring people. How can that not be a good idea?
Edward R Murrow's Ghost
Tue, Feb 22, 2011 : 8:10 p.m.
ROFL!! But, then, you wouldn't have George Clooney coming to eat lunch at your house, would you? Good Night and Good Luck
PformerPfizer
Tue, Feb 22, 2011 : 5:27 p.m.
Just identify 4,000 random unemployed people, give them each a check for $30,000 and be done with it. Do this annually if you wish. You'd save on the back end bookkeeping and paperwork.
HaeJee
Tue, Feb 22, 2011 : 4:46 p.m.
I surprises me how people fail to see the long term gain in filming in Michigan. It is free advertisement for our beautiful state. The mid-west is a large region of the country and if a movie needs to be made in a 4 season region, why not Michigan? FREE ADVERTISEMENT for Michigan. Our youth no longer have the dream of working in a dingy factory assembling auto parts. We have many young people that are artistically talented in this state, why not give them a venue to get experience in the movie industry? When I see Ann Arbor mentioned as the location on a movie, I take pride in that. It is wonderful to show off our beautiful city that is made up of such diverse people living together.
average joe
Tue, Feb 22, 2011 : 9:38 p.m.
I would bet that Haejee couldn't name even one state that the top ten grossing movies of 09' or 10' were filmed in, other than CA.
Craig Lounsbury
Tue, Feb 22, 2011 : 5:41 p.m.
I wonder how much free advertising we really get. When I go to a movie or get a video from Netflix most of the time I have no clue where it was mostly filmed. And I think I'm in the majority in that regard.
Brian M.
Tue, Feb 22, 2011 : 2:32 p.m.
Capping it at a certain amount per year seems a bit silly since how will production companies know if they will be the ones chosen for the $25 million a couple years out? Perhaps lowering the incentive (maybe even halving it) would be a better strategy? A 21.5% cash refund is still pretty generous. The bottom line is this whole enterprise doesn't really help the state all that much unless it's ongoing for a long period. People who work in this industry are used to the prospect of having to move if the thing changes. These aren't lasting jobs.
Craig Lounsbury
Tue, Feb 22, 2011 : 3:40 p.m.
My understanding is that if we reduced the incentive they will be gone. The only reason they are here is because we have the most generous incentive program in the country. As soon as another state has a better deal either by increasing their offer, or Michigan decreasing our offer the movie people will leave. And that basically comes from Mitch Albom who is as big a supporter of the program as anybody.
macjont
Tue, Feb 22, 2011 : 2:24 p.m.
Our son's, neither of whom is involved in the film industry, have left Michigan for greener pastures. While their moves were not precisely film industry related, they were directly related to attitudes and values reflected by the vast majority of opinions stated in these comments. This state, teetering near the edge of a cliff for some time, will be driven into the ravine by the Republican government in Lansing and by those who voted them in. My wife and I will be leaving shortly and will read about the disaster we are certain to leave behind.
Heardoc
Tue, Feb 22, 2011 : 2:06 p.m.
As i reed all the blogs here -- It appears that the left is alive and well in Ann Arbor. Any tax decrease does create more economic activity than a tax or a tax increase. In removing incentives -- tax breaks -- this will dampen economic activity. Many bloggers here think that we 'Owe' government our money. We do not "owe" government anything. What I read here--- a group of individuals think that if there is any economic activity then the state must get a piece of this money. NOT SO! I am hoping that we have a governor as strong as they have in Wisconsin in order to take on the elite left of this state and take the state back from the progressives (regressives). That we have a state that honors individualism and frowns on the 'collective good' concepts of the leftists and communists in our state. That we have a point were we look at taxes as evil and not a good thing. That we view those taking public money with great scrutiny -- including the likes of AFSCME. I hope we look to generate the jobs in a way that is akin to what we have done with the film industry.
Brian M.
Tue, Feb 22, 2011 : 2:35 p.m.
In summary from the esteemed Heardoc: "Don't you see? Jobs will come if we do it a smarter way! Let's just be smart!" Good luck with that. And good luck when you lose your job and have no government program to fall back on.
Craig Lounsbury
Tue, Feb 22, 2011 : 2:06 p.m.
"Is that not what Governor Snyder is doing by eliminating the MBT and replacing it with a much lower tax structure? If, for example, business tax is lowered from 30% to 15%, we are essentially telling ALL businesses that they will have a 50% break on tax payments. " your confusing a reduction in taxes owed with a rebate on business expenses. The two are not the same at all. I will quote my own example from a previous post: "I'm not defending the business tax break but there is a huge difference between the two. keeping it simple with numbers that may not resemble actual tax rates A Michigan business does 10 million dollars of profit. They pay the state 1 million dollars in taxes. Rick Snyder says I'm going to give you a tax break...pay me $600,000 instead. What we did was forgo collecting $400,000 but we are still $600,000 ahead with that business Cecil B Demille comes to our State and makes a movie. He spends 10 million dollars making the movie. He then gathers his receipts fills out his rebate form and we give him 4.2 million dollars back. He then pays taxes like the other business did. It doesn't matter if he pays on 10 million or 5.8 million either way we lost big time on the movie." So again what we are doing for the movie industry is nothing like the tax roll back for businesses in general. One involves taking in less money the other involves giving out money. Thats why its not sustainable. I wish it was.
Veracity
Tue, Feb 22, 2011 : 1:52 p.m.
Craig Lounsbury: You state: "The one from Ernst &Young was paid for by groups with a vested interest in the outcome of the report. That doesn't necessarily mean its wrong but it ought to raise concerns. " The only concerns should be about the accuracy of the data. I would not insult Ernst & Young by claiming that they falsified data and did not provide the facts. Exactly what figures in its report do you question and why? Do you have sources that provide different numbers and that you know to be more reliable? You state also: "Common sense to me says the State giving 40%-42% of the cost of doing business back to a business from tax payer money doesn't work. If it did then we should do it for all businesses." Is that not what Governor Snyder is doing by eliminating the MBT and replacing it with a much lower tax structure? If, for example, business tax is lowered from 30% to 15%, we are essentially telling ALL businesses that they will have a 50% break on tax payments. Remember how Pfizer got tax incentives in order to maintain its research facility in Ann Arbor? If I recall correctly, Pfizer paid $7 million tax to the City yearly but that represented only half of what other similar sized businesses would have paid. The question really is whether Michigan is better for retaining only $60 million of $100 million that a company might spend here if it were given a 40% break on usual taxes. Otherwise, the money goes to benefit the citizens of another state. I do not even believe that a valid principle is being violated by special tax breaks although I can understand why smaller companies bearing a higher tax load will be disgruntled.
Craig Lounsbury
Tue, Feb 22, 2011 : 12:43 p.m.
The problem with the situation is we are looking at two wildly differing reports. The one from the state Senate is from a bipartisan committee. The one from Ernst &Young was paid for by groups with a vested interest in the outcome of the report. That doesn't necessarily mean its wrong but it ought to raise concerns. Common sense to me says the State giving 40%-42% of the cost of doing business back to a business from tax payer money doesn't work. If it did then we should do it for all businesses. To quote Mr Clock above "Yes, the film industry is fickle and will pull up stakes when another state starts offering an even better deal...." Why would we throw money at that?
Andrew Jason Clock
Tue, Feb 22, 2011 : 5:07 a.m.
@1bIt @ macabre, as you can see just above here, veracity has the link to the study and the complete numbers. The state study you refer to only looked at jobs created in the film industry. This study looked at the total economic impact the film industry had on the state, in creating jobs with companies like Chow Catering, which opened its doors in Michigan specifically to serve the craft services needs of local productions, or pumps money into existing companies like Detroit's Westin Book-Cadillac, which saw over $1M in bookings from the film industry last year. Closer to home, here in Ypsi, bars like the Elbow Room, Tap Room, and Sidetracks all got sizable checks for being used as locations, along other local homes and businesses. And, as mentioned above, the publicity hasn't hurt either. No, film incentives aren't the great hope that's going to save us. Yes, the film industry is fickle and will pull up stakes when another state starts offering an even better deal. But for now, it's here and it's bringing money and people into the state, more and more every year, at least it was until the announcement incentives would be cut. So what's better? To take what we can get while we can, or to just give up and let that money walk away?
Veracity
Tue, Feb 22, 2011 : 3:29 a.m.
The entire Michigan film production incentive program has been completely misrepresented. The correct economic effects is provided in a report created by Ernst & Young, entitled "Economic and fiscal impacts of the Michigan film tax credit", February 2011. <a href="http://www.michiganfilmproduction.com/" rel='nofollow'>http://www.michiganfilmproduction.com/</a> Among many other benefits to Michigan, the "Executive summary" established that "In 2010, spending by qualified film productions increased significantly to $322.6 million, which generated $117.2 in film credit costs, equal to 36% of total Michigan production spending." (page i) Also, "the credit program increased significantly in 2010, increasing Michigan economic output by an estimated $503.0 million...." and "film productions resulted in an estimated 3,860 total additional jobs in Michigan ..." and "made $66.9 million of direct payments to Michigan residents and generated an additional $105.6 million of indirect income earned by residents, resulting in a total impact on Michigan resident income of an estimated $172.5 million..." (page ii) Please read the complete 21 page document plus appendices then write the governor and your legislators demanding recognition of the facts and reconsideration of recent legislation limiting Michigan's valuable access to film industry revenue.
Nathan Bomey
Tue, Feb 22, 2011 : 2:45 a.m.
It looks like several readers have already explained how the incentives work. However, in case it's still unclear, here's a basic explanation. As the state Legislature designed it, this is a refundable tax credit. Let's say a filmmaker spends $100 million making a movie in Ann Arbor. Next, let's say the company's tax bill is $20 million. Since the incentives provide up to 42 percent of a film company's spending in Michigan, this particular filmmaker qualifies for a $42 million rebate. Since he owes $20 million in taxes, the state would deem that tax bill paid and, In the end, the filmmaker effectively gets a $22 million rebate from the state. Hope that makes it clearer.
Huh?
Tue, Feb 22, 2011 : 4:37 p.m.
So Michigan tax payers pay the film makers taxes, and rebate said film company for creating a series of low income jobs that fail to pan out as long term? By your model the state is out 22 million that could be used for the education cuts that will take place. I dont care where movies are shot, how much it costs to make them, because its always a case of H&D, where they get what they want for as long as they want it, and then leave without saying good bye.
ChrisW
Tue, Feb 22, 2011 : 3:05 a.m.
Except that the film company won't owe *any* Michigan taxes at all. It's not like Michigan taxes the profits made by movies filmed here. We don't. There is no profit in making movies -- the profit comes from selling and distributing them and there are no large film distributors here. On the other hand, it seems to me that the film credits are certainly getting Michigan some good publicity, so maybe we should just consider it advertising like the "Pure Michigan" ads.
runbum03
Tue, Feb 22, 2011 : 2:16 a.m.
Most of this money probably came from "stimulus" funding. Some of the cash, as well documented in the newspapers, ended up as "donations" (kickbacks?) to the Democratic Party. Why then would these subsidies every end? By the way, even a child can figure out a "subsidy" is simply wealth-redistribution. Here's the formula: 1=1. Both sides always balance out so if you want to "create" a million jobs, then a million jobs have to be deducted somewhere else. 1 always equals 1. Let's end this math lesson; end the Film Subsidy ripoff now!
runbum03
Tue, Feb 22, 2011 : 2:17 a.m.
correction: ever
UMfaninchelsea
Tue, Feb 22, 2011 : 2:02 a.m.
Our son left MI to do film editing in CA a few yrs. ago. I wish the business could continue to grow here so he (and others from the Midwest) could consider coming 'home' to work in the future.
Macabre Sunset
Tue, Feb 22, 2011 : 12:41 a.m.
Not only that, but even the full-time jobs created are far more volatile than Michigan jobs. First, your employer is not from this state. So the incentive itself is leaving Michigan immediately. Nothing to reinvest. Second, the job depends on the $100 million being paid to California businesses *every* year. As we've seen with the superhero movie, even the hint that the subsidy might not be available next year has caused a production to shut down in Michigan. All of a sudden, all the biased calculations are meaningless because you're not paying $100 million for a few hundred jobs, you're paying $100 million *every year* for a few hundred jobs. You might as well shred the money and use it to line the cages at the Detroit Zoo.
1bit
Tue, Feb 22, 2011 : 12:08 a.m.
a.j.clock: No access to the actual study is available on AA.com, detnews.com or freep.com. However, the claim that for every $1 spent $6 is generated is pure fantasy. Michigan's own study on the film credit shows that this is a disaster. The claim that the "full-time equivalent of 2,822 workers" was hired amuses me on multiple levels. First, the assumption is that EVERYONE hired in the food industry, hotel industry, etc was only hired because of the film industry. Second is the term "full-time equivalent" regarding employment. You are either full time or not. Two part-time jobs for part of a year does not translate into a full-time job every day of the year.
MyOpinion
Tue, Feb 22, 2011 : 12:01 a.m.
I am one who likes the "idea" of the film incentives. It is for a non-manufacturing industry that is attractive to knowledge workers and young folks - both something Michigan desperately needs to attract. That said, the current incentive is a race to the top. Lots of states decided to out-do the incentives by early film subsidy states like Louisiana. I would love to see Michigan retain the incentive, but cut it back significantly. We could succeed as many states will scrap their subsidies altogether. I would not mind spending $100 for something that brings back $80 if it has the possibility of breaking even and even being a growth industry in the future. But, right now, the subsidy is too generous, even if it is attractive to film majors at Michigan-based schools.
Andrew Jason Clock
Mon, Feb 21, 2011 : 11:21 p.m.
Unfortunately, aa.com left out the most important number in this report, which is, for every $1 spent on the Michigan film subsidy, $6 is spent in Michigan by film companies on wages, hotels, food, offices, transportation, location rental and much, much more. Take a look at today's Detroit Free Press or News for a more comprehensive rundown of this report, as well as some reporting on the kind of impact loosing the film incentives will have on industries such as food and hotels.
Macabre Sunset
Tue, Feb 22, 2011 : 12:38 a.m.
Ah, yes, a great example of applying a random multiplier to a transient business. There's no science behind the assumption. It's just a paid consultant trying to justify the payments.
jcj
Tue, Feb 22, 2011 : 12:31 a.m.
And how many new restaurants opened because of the huge demand the film industry brought with it? So there were a few more hotel rooms in use for a month. If the film industry is such a golden egg, why is CA in as bad a shape as any state in the country? A bit of advice. If you are trying to prove a point don't use Mitch Albom as a source.
hurleyhen
Mon, Feb 21, 2011 : 10:54 p.m.
While I would like to see the film industry stay in Michigan because Michigan is a nice place to film movies, chances are they will get out as soon as the tax incentives go. That's the Hollywood mentality, get everything for free. To all you young filmmakers out there, stay in Michigan, work on your independent films, do it for yourself. Don't get bamboozled. Chances are you're not going to make it rich and get famous in the movie industry. Usually these people take advantage of you and make you work for free anyways. Educate yourself and start charging what your worth. Make commercials, corporate films, shoot cinematic weddings, and do your creative film work on the side.
John of Saline
Mon, Feb 21, 2011 : 10:50 p.m.
"paid for by groups that advocate in favor of the film incentives" And that's all you need to know. Unless our freinds on the left are suddenly going to trust all studies paid for by, say, the oil industry or the pharmaceutical industry.
leaguebus
Mon, Feb 21, 2011 : 10:05 p.m.
$100M is nothing compared to the $1.5B the Snyder is giving to business with the proposed new lower business tax. Whats really good about the $1.5B is that it there are a bunch of high price police, fire, and teaching jobs that will disappear because of the budget cuts needed to balance the budget. How many jobs will be lost when the state universities start making their cuts? One thing the governor's budget does is that it makes us a great exporter. Exporter of what, you say? Michigan college graduates and trained firefighters and police. Too bad Snyder can't make each state that hires one of these people pay an education fee for these people. We might have an income source here. If another state hires one Michigan subsidized college graduate, they would have to pay us the amount that the student was subsidized for their education. In a UM's students case it would be 20% of their total college costs or about $14K. Maybe we could make the student pay this? Oh thats right, they can't find a teaching job here because there aren't any or the job will probably only pay $30K per year when the Tea Party guys (no new taxes) get done with their budget cutting.
Huh?
Tue, Feb 22, 2011 : 4:42 p.m.
We are the worst state to run a business in, our business tax codes are terrible, and that goes for all sizes of business. I say throw in a flat tax and lets see what happens, I would welcome a real business coming to town instead of a film project here and there. People relocation to Michigan because their real job steers them here, which will lead to buying or renting houses, local shopping, dining, you know spurring tax revenue, not handing it back and then some in check form.
Craig Lounsbury
Mon, Feb 21, 2011 : 10:31 p.m.
I'm not defending the business tax break but there is a huge difference between the two. keeping it simple with numbers that may not resemble actual tax rates A Michigan business does 10 million dollars of profit. They pay the state 1 million dollars in taxes. Rick Snyder says I'm going to give you a tax break...pay me $600,000 instead. What we did was forgo collecting $400,000 but we are still $600,000 ahead with that business Cecil B Demille comes to our State and makes a movie. He spends 10 million dollars making the movie. He then gathers his receipts fills out his rebate form and we give him 4.2 million dollars back. He then pays taxes like the other business did. It doesn't matter if he pays on 10 million or 5.8 million either way we lost big time on the movie.
Macabre Sunset
Mon, Feb 21, 2011 : 10:26 p.m.
There's a difference between eliminating taxes and paying a company to locate here and charging less in taxes. If that's too difficult a question to understand, or you're so focused on hatred of one party to bother to examine the question, then your responses aren't terribly productive.
Brad
Mon, Feb 21, 2011 : 10:01 p.m.
"You can't attach a number to that." You bet we can. I think ERMG attached a number of numbers to it, and they all say pretty much the same thing -- that by any objective standard, it's a losing deal for the Michigan taxpayers.
tlb1201
Mon, Feb 21, 2011 : 9:47 p.m.
GoBlue2009: I'm truly glad you stayed here in Michigan after graduation. But not glad enough to pay you to stay here through an increase in my taxes!
Hot Sam
Mon, Feb 21, 2011 : 9:24 p.m.
These statistical studies are like bikinis' What they reveal is extraordinary... What they conceal is essential...
GoBlue2009
Mon, Feb 21, 2011 : 9:09 p.m.
What about all the young college graduates, such as myself, also a Film Major, who have been able to find work due to these incentives? And guess what? I'm still working in my home state. You can't attach a number to that. The "taxable income" may be in controversy, but it IS generating jobs, you can't argue that.
jcj
Tue, Feb 22, 2011 : 12:23 a.m.
Be glad for the experience you had and thank the rest of us who subsidized your work.
1bit
Mon, Feb 21, 2011 : 9:47 p.m.
Please realize that this is not an "incentive", it is a huge "giveaway" of taxpayer dollars. I might be convinced to support the initiative if the film industry were required to spend an amount equal to the credit in Michigan. This is not happening and thus the death of an industry in Michigan that never really existed.
Stephen Landes
Mon, Feb 21, 2011 : 9:18 p.m.
Yes, we can attach a number to that and the number right now is a great big loss to our State. Maybe economics should have been in your curriculum.
Paul Uslan
Mon, Feb 21, 2011 : 9:03 p.m.
Michigan is also one of the few states that do not require the film company to spend the money they receive from us in our State. They can take the credits or money, film for 3-6 weeks, and then spend "our" money back in California to complete the project.
tim
Mon, Feb 21, 2011 : 8:46 p.m.
My mother-in-law will be happy these movie guys are leaving, last summer they came down her road and knocked down the mailboxes/posts in order to get a clean country shot. Sad thing is they did a real crummy job resetting things and did not return compliant calls. She was really really mad
jcj
Mon, Feb 21, 2011 : 8:40 p.m.
Ghost Great Job! I am going to sit on the side lines it looks like you have this argument under control!
thinker
Mon, Feb 21, 2011 : 8:13 p.m.
No argument from me on the fiscal irresponsibility of the program. If Michigan really is that great a place to make a movie--venues, actors, walk-ons etc-and has proved itself to be, then there is no need for fiscal incentives. Wasn't this just supposed to be a way to prime the pump, so to speak?
mercury69
Mon, Feb 21, 2011 : 8:04 p.m.
It doesn't really matter if you "believe" the numbers or not. Snyder's budget is going to kill this industry in Michigan anyway: <a href="http://www.freep.com/article/20110221/ENT01/102210379/-Avengers-pulls-out-other-films-might-follow-after-proposed-incentive-change?odyssey=tab" rel='nofollow'>http://www.freep.com/article/20110221/ENT01/102210379/-Avengers-pulls-out-other-films-might-follow-after-proposed-incentive-change?odyssey=tab</a>|topnews|text|FRONTPAGE
r treat
Mon, Feb 21, 2011 : 7:59 p.m.
Bravo Ghost! I agree 100%. You must inform everyone when you quote hoke though. Did you think you were too "cool" to be caught? The Tradition!
Craig Lounsbury
Mon, Feb 21, 2011 : 7:56 p.m.
"The debate over the sustainability of Michigan's film industry tax incentives is heating up with the release of a study concluding that the incentives generated more "indirect jobs" than the film companies generated themselves." This shouldn't heat up anything. All we have here is a study funded by "Citizens In Favor Of The Film Subsidy" who bought some numbers that show the whole boondoggle maybe maybe maybe didn't lose quite as much as the nonpartisan study showed it lost.
Macabre Sunset
Mon, Feb 21, 2011 : 7:52 p.m.
"The study... paid for by groups that advocate in favor of the film incentives..." I've found that the "studies" made on behalf of groups looking for public money are quite dishonest in this arena. They equate transient work with full-time jobs and are quite generous with concepts like "multipliers" for every dollar spent during a project. I would take these claims with more than one grain of salt. And even if they are true, it's still costing taxpayers millions of dollars to bribe the film industry into making a few movies here. It may be fun to catch a glimpse of a famous actor in a restaurant. But it's not worth millions of dollars. Take a trip to Los Angeles if this means a lot to you - you'll save money in the long run.
Craig Lounsbury
Mon, Feb 21, 2011 : 8:01 p.m.
"I've found that the "studies" made on behalf of groups looking for...." Any group who funds a study with a vested interest in a specific outcome is open to suspicion.
5c0++ H4d13y
Mon, Feb 21, 2011 : 7:52 p.m.
How many jobs were lost or not created because a michigan businesses had to pay for these tax incentives for outsiders?
1bit
Mon, Feb 21, 2011 : 7:17 p.m.
I like ERMG's and the other similar comments. The best case scenario for this absurd giveaway to the film industry is a disaster. Moreover, the study quoted in the article seems flawed in that they are counting jobs hired by the food industry, hotels, etc as all being the result of the film industry. The odds are that they are overstating the meager impact the film industry has had on Michigan. Also, why don't each of these movies or TV shows proudly display "MADE IN MICHIGAN" or "PURE MICHIGAN" (yes, in all caps, taking up the whole screen for 3-5 seconds)? The reason is that this "industry" is really an industry of locusts that scavenge an area then move on to another leaving nothing of particular value behind.
Townie
Mon, Feb 21, 2011 : 7:11 p.m.
More jobs than SPARK created...
Edward R Murrow's Ghost
Mon, Feb 21, 2011 : 7:02 p.m.
@truthspeak: Wrong. I'll speak VERY slowly this time. It is a refundable tax credit. See: <a href="http://www.michiganfilmoffice.org/For-Producers/Incentives/Default.aspx" rel='nofollow'>http://www.michiganfilmoffice.org/For-Producers/Incentives/Default.aspx</a> Meaning that if the credit is more than the amount of the tax owed, the business will be refunded the difference. That is not a "tax credit" as that term ought be properly understood. It is a subsidy. The rest of us cannot get a tax credit that is worth more than the tax we owe. That is, with one exception, which is the earned income tax credit for the poor--which works in exactly the same manner. In that case, the poor pay no income tax whatsoever and receive a subsidy from the state--a subsidy which is being severely cut if not altogether ended under the Snyder budget proposal. And it explains how it is that Michigan took in $17 million in taxes from film production companies last year but paid out--literally wrote checks for--more than $100 million to them. If this were simply a tax credit, there would be no money changing hands from the state to the filmmakers. Good Night and Good Luck
Bob Martel
Mon, Feb 21, 2011 : 6:32 p.m.
This program never made any economic sense. All it did was make people feel good to see Brad Pitt walking down Main Street. Good riddance!
truthspeak
Mon, Feb 21, 2011 : 6:28 p.m.
@ Edward R Murrow It is not a subsidy it is a credit on their tax form, not a check written to the film industry before production. It is a credit on their filed taxes. From <a href="http://www.michiganfilmoffice.org/For-Producers/Film-Credit-FAQs/Default.aspx" rel='nofollow'>http://www.michiganfilmoffice.org/For-Producers/Film-Credit-FAQs/Default.aspx</a> Once the production company has completed all production-related work in Michigan, it must request a post-production certificate from the Michigan Film Office. After all submitted expenditures have been certified to qualify for the credit, the Film Office will issue the post-production certificate, which sets forth the amount of the production company's credit. The production company must then file a Michigan Business Tax return at the end of its tax year to claim its credit, attaching a copy of the post-production certificate to its tax return. Error-free returns claiming refundable film production credits are expected to be processed in 3 – 4 weeks. A production company may also assign all or a portion of the credit received to other parties.
ssAA
Mon, Feb 21, 2011 : 6:53 p.m.
It's a refundable credit, which is essentially a subsidy. A company can spend $100 million on production costs, have a $1 million MBT liability, and the State will give them a $39 million refund.
DonBee
Mon, Feb 21, 2011 : 6:50 p.m.
And the end result is a check that is cut to the film company. It is not just a reduction in any taxes owed, it is an actual check that the company gets, since the taxes are less than the 42% cost that Michigan reimburses. So, yes the TAXPAYERS are out $100 million less any taxes due. Yes, the state has subsidized other industries thru MEGA and other programs. Yes, it is a form of corporate welfare, and yes, it has gone on for years. But the new Governor is attempting to level the playing field and close a lot of loopholes on the business side. This just happens to be one backed by famous people with money and access to public relations teams. The Governor's budget is just that a PROPOSED budget, you don't like it? Tell your State Representative and your State Senator. Maybe they can take $100 Million out of the revenue sharing program for cities or out of the school funds to save this one.
Edward R Murrow's Ghost
Mon, Feb 21, 2011 : 6:18 p.m.
"The 100 million loss that keeps being repeated in many news articles is not actual dollars lost, it is potential dollars lost. Most of this dollar amount is the amount of the actual tax credit, an amount that would never be collected if the movie industry never came here." Wrong. This is not a tax credit. It is a subsidy. There is a huge difference. Look it up if you don't understand how they differ. Michigan pays to filmmakers up to 42% of their COSTS while in the state of Michigan. Taxpayers are paying for 42% of the cost of production. That, ladies and gentlemen, is what Glenn Beck, Sarah Palin, and the Teapartyists call "socialism" (never mind that they don't know the meaning of the word). Good Night and Good Luck
truthspeak
Mon, Feb 21, 2011 : 6:13 p.m.
The 100 million loss that keeps being repeated in many news articles is not actual dollars lost, it is potential dollars lost. Most of this dollar amount is the amount of the actual tax credit, an amount that would never be collected if the movie industry never came here. This figure is not an actual expense that the state payed out. So if you talk numbers, If the film industry paid 42 million in taxes and got a 58 million tax credit, then the 42 million is a revenue gain for our economy rather than the 58 million being a loss. The 59 million never existed before and would not have existed if not for these credits, so to claim that that revenue is a loss is disingenuous in my mind. Do many of you really think the state is paying out 100 million in salaries to run the film incentive program? Any taxes brought that are brought in are a net gain because plain and simple the movie industry would not be here without it. We are not giving a discount to an industry that will stay without it, we are giving an incentive to an industry to do business in our state instead of somewhere else. The 42 million in my example would be actual revenue while the 58 million is unrealized revenue. Seems silly to give up the 42 million when the 58 million is not obtainable realistically.
Paul Uslan
Mon, Feb 21, 2011 : 9:06 p.m.
The tax credits can be used against box office revenue on the showings in the Michigan theaters, avoiding taxes on earned income.
alan
Mon, Feb 21, 2011 : 8:05 p.m.
I think that you are incorrectly assuming that the credit is a tax discount. It is a cash payment that can exceed the actual tax liability.
ChrisW
Mon, Feb 21, 2011 : 6:51 p.m.
That's not true. The film tax credits can be sold to other firms with Michigan tax liabilities. It really *is* a raw payment from the Michigan government to the film companies, even if there is zero tax liability for a given movie. That's what makes it the most generous plan in the nation.
Pizza Man
Mon, Feb 21, 2011 : 6:08 p.m.
Rich Snyder is basically getting rid of the tax incentive for the film industry to come to Michigan because he want to create jobs. After his announcement of this, 3 movies and 1 TV show have decided not to come to Michigan. Does this sound like more jobs for the state? Good job Governor! Is there a way to calculate the money that is spent in our state, indirectly spent from the film industry being here? For example, the movie crew going out to eat, money of groceries, seeing movies, buying Starbucks etc. This has to be a huge number alone. I know that persons happiness doesn't come in to play when the budget is involved but, I for one am excited to have the movie industry here! I was very pissed off to hear that Rich Snyder is planning to make these cuts. They don't make sense to me. Just as movie studios are being built in our state we will lose the film incentive and this is going to create jobs? I guess I'm not good at math after all.
DonBee
Mon, Feb 21, 2011 : 9:57 p.m.
So were several other big name films according to "people in the know" and they never showed up. Show me a hotel contract or a contract for police services.
Peter Baker
Mon, Feb 21, 2011 : 9:52 p.m.
How about The Avengers (with Ironman appearing in it)? <a href="http://www.freep.com/apps/pbcs.dll/article?AID=2011102210379" rel='nofollow'>http://www.freep.com/apps/pbcs.dll/article?AID=2011102210379</a> "They were all set to come here," said Chris Baum of Film Detroit, a division of the Detroit Metro Convention & Visitors Bureau. When producers couldn't get confirmation that they would still qualify for the incentives, they decided to pull out of the state, Baum said.
DonBee
Mon, Feb 21, 2011 : 6:44 p.m.
Pizza Man - How many movies get announced and never made? How many TV shows never get beyond pilot? If it was Batman, Ironman, etc, I would be concerned, but seeing the announcements posted. I doubt more than 1 of these would have ever been real. I also note that they had not previously indicated they were filming in Michigan. I see these announcements as just more hype.
Ron Granger
Mon, Feb 21, 2011 : 6:06 p.m.
I also fail to see how this is anything but an enormous waste of my cash. $117.2 million in incentives in 2010 1039 direct + 2822 indirect jobs = 3861 jobs $117.2 million / 3861 jobs = taxpayers spent $30,300 for each job created. Can anyone possibly justify spending $30K of taxpayer cash for each job created? Especially since many of those jobs are minimum wage service jobs ("do you want fries with that?"). I have seriously considered getting into the "film" business with friends to cash in on this corporate welfare program.
Edward R Murrow's Ghost
Mon, Feb 21, 2011 : 5:54 p.m.
OK. Let's do some math. Let's make the very generous assumption that each of these "indirect" jobs resulted in $50,000 in taxable income. Total taxable income = 3,000 x 50,000 = $150,000,000 total income into the state. And this presumes that none of this income would have happened but for the films--a very poor assumption. So now my math has made two VERY favorable assumptions for the advocates of the film "credit". Working with those assumptions: $150,000,000 total income x the Michigan Income tax rate of 4.35% = $6.5 million dollars in tax revenue generated in "indirect" jobs. If earlier reports were correct, filmmakers paid approximately $10 million in taxes last year. This means (again, with my VERY generous assumptions) that the film industry generated approximately $17 million in tax revenue for the state at the cost of $100 million in subsidies. So the total cost to taxpayers for a "cool" industry in a state that is cutting police and fire protections, that is cutting services to the poor, that is cutting back on infrastructure repair, that is cutting back on K-12 spending, and that is cutting back on university spending, is a "COOL" $83 million. Makes no sense to me. But, then, no one ever accused me of being "cool". If these numbers are incorrect, I urge someone to correct them. Can anyone show that the state's $100 million investment in taxpayer money comes anywhere close to breaking even? Good Night and Good Luck
Huh?
Tue, Feb 22, 2011 : 4:30 p.m.
If Nate is right on his figures, we have gone from 10/1 to 10/3 in which we might as well round and say 3/1, which in words means for every 10 dollars the state spent, they got 1 back, which is teribble business, with the new figures, they spent 3 to make 1, which is better then spending 10 to make 1, but they still lost 2 more dollars that could have been thrown into a pot hole around here, or better yet, saved. THE FILM INDUSTRY WAS NOT GOING TO SAVE MICHIGAN, Lets close the book on the horrible idea.
Edward R Murrow's Ghost
Mon, Feb 21, 2011 : 11:22 p.m.
They get a subsidy from the state for up to 40% of their production costs in the state of Michigan (42% if they film in certain identified communities). It has no relationship whatsoever to the tax they owe except that they file for the subsidy when they file their MBT. The state "collects" the tax owed to it from that subsidy and then "refunds" the difference. The result is that the vast majority of film projects in this state walk out of here with millions of dollars of taxpayer money in their pockets and have "paid" their tax out of the subsidy given to them. Yes, it is truly stupid in these economic circumstances. Good Night and Good Luck
MichFanTex
Mon, Feb 21, 2011 : 11:11 p.m.
Question about the subsidies. A) Are these monies paid to the film industry irrespective of any taxation? B) Are they a return of X% of taxes paid? Or C) are they X% of taxes forgiven which otherwise would have been owed? If the answer is B or C, the state of Michigan has lost nothing. If A, truly stupid.
Tex Treeder
Mon, Feb 21, 2011 : 5:41 p.m.
Rather than Snyder bashing, I'd argue that this is the sort of information that Snyder would use to keep film industry incentives. He strikes me as a realistic number crunching kind of guy, and if the data support incentives, then shouldn't he? On the other hand, as much as I'd like to support film incentives, if they're a drain on the economy then I'd agree they should go.
MB111
Mon, Feb 21, 2011 : 5:29 p.m.
:waits patiently for the inevitable Snyder bashing:
Edward R Murrow's Ghost
Mon, Feb 21, 2011 : 5:55 p.m.
I'm no fan of the governor's, but see my numbers below. Seems a VERY rational decision. Good Night and Good Luck