News Story

Five Reasons Government Subsidies For Films Are A Bad Idea

Politicians help Big Hollywood soak taxpayers for few benefits, much harm

Michigan subsidizes up to 32 percent of expenditures for film, television, music video, video game and other media projects done in the state. Essentially, this means that select qualified ventures receive a check from the state treasury for production.

I recently debated Michigan's film subsidy program on Fox 2 in Detroit. I gave several reasons why the state should not be spending taxpayer money on this private enterprise. Here they are:

  1. The Michigan film subsidy program does not create jobs. 

    As James Hohman, a fiscal policy analyst at the Mackinac Center for Public Policy reported in 2010, the initial program was signed into law on April 7, 2008. That month, there were about 5,867 jobs in Michigan's motion picture and sound recording industries. One year before the subsidy went into effect, there were about 6,750 jobs in that area. Two years after the bill-signing, there were about 5,300 jobs in the industry (see chart nearby). It's true that film production companies tend to use employee-leasing agencies, meaning that the jobs reported by the companies and the film office might show up in another industrial category, but the reality is that despite immense subsidies, Michigan is nowhere close to an independent or sustainable film industry.

    Of course, spending hundreds of millions of dollars on a select sector of the economy may very well mean more jobs for that industry, as is claimed by film subsidy supporters, but analyses that find job creation through subsidizing movies almost always ignore the cost of the program. That is, where that money may have been spent otherwise, whether in the private-sector or on other more worthy government projects like roads.

  2. Virtually no one who has analyzed film subsidy programs across the nation finds them to be worth the cost. 

    The best source for measuring what the program actually brought back to the state in terms of tax dollars is a Michigan Senate Fiscal Agency report from 2010-11. It found an 11 percent return on investment: State spending of $125 million for $13.5 million back. The study also found that nearly half of the film credits left Michigan and had no effect on state economic activity.

    Film subsidies are an area where scholars are almost united across the political and economic spectrum — these programs are not worth the cost. The conservative Tax Foundation has found that movie production incentives "are costly and fail to live up to their promises." The liberal Center on Budget and Policy Priorities found film subsidies to be "a classic race to the bottom" and the economic benefits "more fiction than fact."

  3. The subsidy has led to massive investments in film studios leading to disastrous results. 

    Allen Park paid $40 million for property and improvements of Unity Studios — a movie studio that came to be because of the Michigan Economic Development Corp., the film program and a partner who promised the project would create "at least 3,000 jobs."

    Fast forward a few years. The studio never happened, taxpayers are on the hook for what may end up being over $100 million, public employees are being asked to take cuts or lose their jobs, the council and the mayor who approved the deal were replaced, and Allen Park now has an emergency manager to try and deal with it all.

    Michigan Motion Pictures Studios, formerly Raleigh Studios, in Pontiac was the site of the recently-released, "Oz: The Great and Powerful." It needs a continuing bailout from the pension funds of Michigan public employees to meet its bond payments. Under a deal reached between former Gov. Jennifer Granholm and wealthy investors, the state pension funds back the studio, and when those payments weren't made, the state raided the pensions of teachers, police officers and other state workers to cover the difference. The state has paid $1.68 million so far.

  4. Film subsidy programs are being shut down in other states because of a multitude of problems. 

    According to Bloomberg Businessweek, states have given $3.5 billion in production incentives since 2005. But because of cost concerns, a lack of job creation and other issues, they are starting to cut back. The article reports: "Kansas and New Jersey have suspended their tax credits. Rhode Island has capped subsidies at $15 million annually, and Wisconsin's are set at a measly $500,000 a year. Arizona's program is set to expire … Larry Brownell, head of the Association of Film Commissioners International, which represents 41 of the 42 states offering credits, predicts half the states will shelve their programs within a decade."

    The subsidies have ended in Iowa and a state commission in Missouri recommended repealing its program. Even in Louisiana, which spends the most on films and where support is particularly strong and bipartisan, film office bureaucrats are being grilled more and more about the real cost of the program.

  5. Regardless of political beliefs, Big Hollywood teaming up with government should violate the conscience.

    The majority of film subsidies go to big companies, mostly based in California. In fact, the Michigan Film Office says on its website that large productions are more likely to be chosen. So the Michigan film subsidy program is effectively a direct subsidy from the middle class to the rich; and few outside of a free market think tank are taking the side of regular taxpayers against millionaire actors and actresses and billion-dollar studios.

    Filmmaker Michael Moore could take up the cause, except he benefited from the program. Moore made a film called, "Capitalism: A Love Story," which, in his words, seeks to expose "the disastrous impact of corporate dominance on the everyday lives of Americans." Moore has stated repeatedly that he fights for the little guy against special favors for groups from government. In a prominent scene in the film, he stands with a bag on Wall Street and shouts, "We want our money back!"

    But Moore requested and was approved for $1 million from Michigan's film subsidy program. In the end, according to The New York Times, he received over $840,000 from Michigan taxpayers to film some of the movie in his home state.

By nature, politicians love spending other people’s money, especially on programs with easily seen benefits and lesser seen costs. This explains why it is perhaps unsurprising that the original incentive passed 108-0 in the state House and 37-1 in the state Senate (former Sen. Nancy Cassis, R-Novi, was the only politician to stand against the program).

And many news organizations report almost exclusively on the positive parts of the subsidy while rarely covering the costs.

That’s why spending taxpayer money on movie making is ideal for the major players who influence public opinion. It has the benefit of looking like government is "doing something" to create jobs while at the same time bringing recognizable stars to the state.

But political decisions have real world consequences and the results of the Michigan film subsidy program are almost uniformly bad.

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.