Last month Gary Olson, an official advisor to the Michigan State Senate on fiscal matters, advised the appropriations committee that the state’s new tax incentive program for filmmaking companies will cost over $127 million in tax credits this year in exchange for only $10 million in income and sales taxes that 22 film projects presently committed to the state will generate.
Under this hand-out pushed by Governor Jennifer Granholm and star-struck state legislators earlier this year, filmmakers get a 40-cent credit from Michigan taxpayers for every dollar they spend in the state to make movies, television programs, and even computer games. This credit is applied against the amount a filmmaking company owes under the Michigan Business Tax. But that’s not all. That 40 cents is not just a tax credit, but a refundable tax credit. That means if the credit exceeds the amount of the state’s MBT bill to the company, the taxpayers then cut the film company a check for balance of the credit.
That’s right! We are paying the film industry to shoot movies in Michigan. For example, if a filmmaking company spends $10 million in the state for a movie project, it gets a $4 million refundable tax credit. If the company’s MBT bill is $2 million, then the remaining $2 million of the credit is directly paid to the company straight out of the state’s tax coffers. In exchange for all this, according to Olson, the project will put back into the coffers about $790,000 in state income and sales taxes. To add insult to injury, the film company won’t even pay those taxes. The local employees and vendors of the company will.
Meanwhile Guv Jen is telling Michiganders to suck it up, because there will be no limit on this taxpayer giveaway to the film industry. The governor along with the legislators who backed this boondoggle insist that we have to subsidize the film industry if we want it to take root in the Great Lakes State. Of course, they say we must also understand this will be a long process that will not produce a robust film industry here overnight. In other words, the current crop of politicians who are now paying for their fantasies of hobnobbing with the stars with our tax dollars will be long out of office when this idiotic waste of money does nothing better than drawing into our state a gaggle of weak businesses that can’t survive without a taxpayer handout.
The stupidity of these politicians is costly to us. (By calling them stupid, I am being charitable. I assuming that they are benighted and not bedeviled in what they have done.) They throw away our tax dollars on film companies that will not do business anywhere unless they get generous subsidies -- because they cannot make money otherwise -- and pay for this foolishness by ratcheting up the tax burden on other companies that can and do business in this state without any subsidies -- until that burden either ruins them, restricts their growth, or drives them out of state. Thus, Michigan becomes an economic wasteland.
Let’s be clear. Lower taxes (as opposed to subsidies) are good for all of us, if they are non-discriminatory. However, they will wreck an economy (especially as subsidies) if politicians pick and choose which businesses get their favor. Call this Gresham’s Law applied to business. Taxpayer subsidies draw in weak businesses and drive out strong ones. Renaissance zones, bio-tech and ethanol subsidies, the farm preservation program, and the other targeted business tax breaks and subsidies all contribute to the same rotten result -- as this new filmmaker tax credit will -- of impoverishing us.
It’s long past time to say no more. Cut taxes for all of us, not just those who catch the fancy of our elected officials.