Some bad ideas don’t die.
Lawmakers introduced a pair of bills in the Michigan House and Senate earlier this month aimed at restoring the state’s corporate tax incentive for the entertainment industry. If the law were enacted, taxpayers would reimburse 20-30% of state spending on film, television and commercial productions for the next decade. The program would cost taxpayers up to $50 million a year to get started and $100 million a year ten years from now.
“It’s about jobs,” said Senator Adam Hollier, co-sponsor of one of the bills, told the Detroit Free Press. The incentives, he said, are “a wise investment in our state’s economy and its workers.” Supposedly, tens of millions of dollars in grants will spur production companies to flock to Michigan and create thousands of jobs.
But Michigan’s history with movie incentives shows that’s patently wrong. By the time the previous state program ended in 2015, taxpayers had paid $500 million to create about 700 jobs. No wonder the Senate Tax Agency determined Michigan’s ‘investment’ in movie incentives only made eleven cents on the dollar— a loss of 89 per cent.
Michigan’s lackluster experience was not unique. My peer-reviewed study from over 40 states examined the relationship between film incentives and wages, jobs, and economic growth over a 15-year period. The result was clear: entertainment incentives failed to attract a larger share of the industry, created few permanent jobs, and had no positive effect on state economies. The subsidies ended up enriching movie industry moguls while doing little or nothing for state economies.
These uninspired effects cannot be attributed to insufficient investment. In a separate study, I looked at the states that have invested the most money in movie incentives: New York, Georgia, Louisiana, Connecticut and Massachusetts. Despite spending billions of dollars, these states have fared no better than their peers. A third study found that California was unlucky neither with his incentive. And Hollywood is already there.
Colleagues have come to similar conclusions. A Peer-reviewed A study of New Mexico and Louisiana, where movie incentives remain firmly in place, concluded that incentives have a “very limited” ability to create a new movie industry. Another study determined that there was no reason to believe that movie incentives were beneficial to state economies. yet another also reported that such incentives have “little impact”.
If the trash wasn’t enough, Hollywood’s well-being regularly invites criminal activity. Lax oversight nearly sent former Iowa Film Bureau chief to jail. A director has been sent to jail after submitting forged documents to Massachusetts officials to receive a greater incentive there. A federal jury convicted a film producer for attempting to defraud the Louisiana program. A California state senator admitted to taking bribes$25,000 of which was laundered through a nonprofit called “Californians for Diversity,” to secure his vote for an expanded incentive.
Nothing in the proposed program will protect taxpayers from further waste. the Internal bill directs the Michigan Film and Digital Media Office to publish a “brief assessment of the overall effectiveness” of the incentive each year, including a chart of the number of “jobs created and maintained”. But it’s the same agency responsible for distributing the money to the production companies. Entrusting a bureaucracy with the responsibility of evaluating how it has spent taxpayers’ money is a profound conflict of interest.
Still, this may be a minor point. Corporate tax incentives for the entertainment industry and countless others are a fundamentally unsound economic development strategy. Taxpayers in Michigan and elsewhere should not tolerate policymakers bringing back a failed program. Film and television incentives are not a “wise investment”. This theory is a fiction.
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