Tax breaks for films get star billing

Posted on February 22, 2011

$1 in state incentives buys $6 in economic activity, report says

A study released Monday supports the Michigan film industry’s contention that state tax breaks for filmmakers generate much more in economic benefits than their cost.

The new Ernst & Young study, commissioned by the convention and visitors bureaus for Metro Detroit, Grand Rapids, Ann Arbor and Traverse City, found every dollar spent in state tax breaks to filmmakers generates nearly $6 in economic activity.

The tax breaks created 3,860 full-time equivalent jobs for state residents in 2010 and had an estimated impact on sales statewide of $503 million, according to the report.

The study’s release came four days after Gov. Rick Snyder said he wants to scale back tax help to filmmakers, capping incentives at $25 million, starting in fiscal 2012. About $163 million in incentives were approved for 2010, according to the Michigan Film Office.

“We’ve already had multiple films pull out of Michigan, most recently ‘The Avengers,'” said Chris Baum, senior vice president for the Detroit Metro Convention & Visitors Bureau and its Film Detroit division.

Film incentive proponents are rallying to save the Michigan industry, planning meetings next week in Troy and at 7:30 p.m. Thursday at Maxsar Studios in Livonia. Speakers at Thursday’s town hall meeting include Detroit Free Press columnist Mitch Albom, a screenwriter, and Philippe Martinez, CEO of Maxsar Studios.

Baum declined to provide the cost of the study, but added its findings were given to the Snyder administration before the governor’s tax break plan was announced.

Since April 2008, film and TV companies have been able to receive up to 42 percent of production-related expenses, plus a 25 percent Michigan Business Tax credit for infrastructure investment and credits for on-the-job training for film and digital media workers.

Critics such as the Mackinac Center for Public Policy question the Ernst & Young results because other studies such as a 2010 Senate Fiscal Agency report found the film credits have cost the state more than it has generated in revenue.

“We think (Snyder) should go further and eliminate the program wholesale,” said Michael LaFaive, the Mackinac Center’s director of fiscal policy. “Every dollar used to incentify film production is $1 deprived to entrepreneurs and other people across the state for their own use.”

Film credit backers worry Snyder is hurting Michigan’s business climate.

“The whole industry was put back on its heels for survival,” said Kenneth Droz, former communications manager for the Michigan Film Office who now runs a consulting business and is helping organize Thursday’s meeting. “(Snyder) literally has cost 1,000 jobs right off the bat.”

Additional Facts

  • Film productions qualifying for the tax credits spent $322.6 million in Michigan in 2010, generating $117.2 million in film credit costs, up from $209.3 million in spending and $73 million in credits in 2009.
  • Subtracting certain state and local tax credits and other expenses, the net cost of the film tax incentives is $84.7 million.
  • Michigan film productions generated 3,860 jobs in Michigan in 2010, up from 2,631 jobs in 2009.

By Melissa Burden, The Detroit News