News Story

Big Hollywood Bailout: Taxpayers Spent Nearly $40 Million To Subsidize Disney's 'Oz'

Michigan citizens helped pay for Disney's record profits

In 2010, Michigan had an annual unemployment rate of 12.5 percent. Then-Gov. Jennifer Granholm told lawmakers to expect a $1.58 billion deficit in the following year and to expect a $263 per pupil cut for K-12 education. 

Yet, the state played a part in allowing one of the most lucrative companies in the world to post a record $4.8 billion in profits by handing it nearly $40 million in film tax credits.

That was the year Disney made the movie, "Oz: The Great and Powerful," and received $39.7 million of the $75.2 million the state of Michigan handed out to film producers. Ironically, the state film subsidy nearly matched the $39.8 million salary Walt Disney Chief Executive Robert Iger was paid in 2012. 

"Oz" was filmed in Pontiac at Michigan Motion Picture Studios, formerly known as Raleigh Studios. The movie officially opens on Friday.

While Disney went on to post a record profit, Raleigh Studios struggled. It has missed three payments to investors, which had to be paid for by the State of Michigan Retirement Systems. The state has paid $1.68 million in the last year and is on the hook for $18 million in bonds if the Michigan Motion Pictures Studios is unable to make its payments to bondholders. 

Gov. Rick Snyder has proposed slashing the amount the state gives to filmmakers by 50 percent, cutting the $50 million cap to $25 million. 

The company that applied for the Michigan film credit for "Oz" was Emerald City Film Inc. According to California’s Secretary of State, Emerald City Film Inc.’s CEO is Jim Kaperstein, who is the associate general counsel at The Walt Disney Co. Disney confirmed in an email that Kaperstein started Emerald City Film and the address listed with the business filing with the California Secretary of State is the same as Walt Disney Studio’s Burbank, Calif., location.

Disney got millions in federal aid in 2010, too.

According to Florida Watchdog, Disney received $110 million through a federal tax credit. The film credit came via the American Jobs Creation Act of 2004. 

Those two tax credits led to a record setting year for Disney. The company’s profits shot up 21 percent to a then-record $4.8 billion in 2011. 

In 2010, State Rep. Tom McMillin, R-Rochester Hills, spent hours sifting through receipts filmmakers put in for reimbursement from the state.

"Do you know what businesses have to make to pay $40 million in taxes?" Rep. McMillin said, referring to what other business had to pay for Disney to get the subsidy. "For Michigan businesses to pay $40 million, they had to lay off or not hire a lot of people. I don't like that it went out of the state and continued to enrich millionaires and billionaires with government subsidies."

As was written recently on a Mackinac Center blog post, for 2010-11, "the Michigan Senate Fiscal Agency found that even among the most optimistic of assumptions, the film program brought the state only $0.11 per dollar spent — costing Michigan taxpayers $125 million and returning $13.5 million in 2010-11."

According to the Center for Budget Priorities, economic analysis of film subsidy and tax credit programs across the county have been almost unanimous that they are not worth the cost.

(Editor's note: This story has been edited since its original posting. The focus of the story has not been altered.)

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.