Record Profits for Warner Bros. Doesn't Stop State From Giving Company Huge Subsidy
Movie company made $1.2 billion; Michigan taxpayers to give it $35 million
While Michigan taxpayers prepare to dole out $35 million to Warner Bros. for the filming of the expected blockbuster Superman-Batman movie sometime early in 2014, the company could be in for record profits.
In 2012, Warner Bros. had an operating income — profits that exclude interest and income tax expenses — of $1.2 billion, according to The Hollywood Reporter. That's about the same amount the state of Michigan gives in general fund dollars to higher education and community colleges.
Warner Bros. is projected to spend $131 million in Michigan while filming the Superman-Batman movie, according to the Michigan Film Office.
"The question of why such a profitable industry needs such a leg up is an interesting one," said Scott Drenkard, an economist with the Tax Foundation, a tax policy think tank in Washington, D.C. "I don't think the film tax credits are good policy."
Drenkard said when a company like Warner Bros. gets a tax break, other businesses that aren't favored by the state have to pay more.
Michigan's film incentive pays up to 35 percent of expenditures made in state by a production company.
Politicians like film credits because the credits give them a chance to rub shoulders with celebrities, Drenkard said.
As an example, he cited a situation where Maryland Gov. Martin O'Malley posted a photo in November on his Facebook page of himself with Seinfeld actress Julia Louis-Dreyfus while she was filming HBO's "Veep" in Baltimore.
In 2008, filmmaker Michael Moore questioned the logic of giving billionaire dollar corporations millions of taxpayer dollars via film credits.
"These are large, multinational corporations — Viacom, GE, Rupert Murdoch — that own these studios. Why do they need our money, from Michigan, from our taxpayers, when we're already broke here? I mean, they play one state against the other, and so they get all this free cash when they're making billions already in profits. What's the thinking behind that?" Moore asked at a film festival in Traverse City.
However, that didn't stop Moore from taking more than $840,000 in Michigan taxpayer dollars from film credits for his own movie, "Capitalism: A Love Story," which criticized special deals from government to corporations.
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.