News Story

Cost to Replace Lost Jobs with Michigan Film Subsidies: $39.4 Billion

A new issue paper from the non-partisan Senate Fiscal Agency estimates that Michigan film production tax breaks and subsidies generated the equivalent of approximately 355 full time jobs in 2009, or 1,542 if “indirect” jobs are also counted. During that year the film incentives’ net cost to taxpayers was $37.5 million.

When the agency figures in other factors the cost comes to $193,333 per job created by the incentives, or $44,561 per job if one includes the estimate of “indirect jobs” created.

Michigan employment declined by 204,000 jobs during 2009. Replacing all these lost jobs with subsidized film production jobs would have cost state taxpayers $39.4 billion (or $9.0 billion if the “indirect” jobs estimate is included[*]).

The entire state budget for the 2009 fiscal year was $45.5 billion, of which $25.1 billion came from state taxes and fees (most of the rest was federal money, including “stimulus” spending). So replacing all the jobs lost in 2009 with “direct” jobs generated by film production subsidies would have required a state tax increase of 156 percent, all of which would have gone to film producers. Replacing the approximately 800,000 jobs this state has lost since 2000 would cost $154.6 billion, or almost half the state’s annual production of goods and services.

Of course, no one has suggested that all the lost jobs can or should be replaced by film production jobs. Still, it is useful to do the arithmetic just to put claims for this program in perspective. And it’s worth noting that the number of “motion picture and sound recording” industry jobs in this state actually declined between April 2008 when the film subsidy program began and September 2009 (the most recent count).

The author of the SFA paper comes to this conclusion about the program:

“The nature of the credit and the resulting activity is such that under current (and any realistic) tax rate the State will never be able to make the credit ‘pay for itself’ from a State revenue standpoint, even when the credit generates additional private activity that would not have otherwise occurred.”

Importantly, this conclusion does not include the number of jobs and wealth not created in 2009 because $37.5 million was taken from other Michigan job providers and taxpayers and given to film producers. SFA estimates that the income redistribution figure will increase $100 million in 2010.

The Michigan film incentive program was approved in 2008 by a unanimous vote in the House and just one dissenter in the Senate. It provides a “refundable” tax credit of up to 42 percent of the expenses incurred here by film producers, and various other credits for media infrastructure investments and job training.

“Refundable” means that the Department of Treasury sends film producers a check for any credit over-and-above the amount they owe in Michigan Business Tax. Due to government secrecy, the department has not revealed how much actual cash was transferred to film producers, but more than half the credits may easily have been paid out to them in cash.


[*]The leading small business lobbyist in the state calls these indirect job estimates “funny numbers they pull out their backsides.” The author of the SFA issue paper notes that “the accuracy of this estimate is essentially unverifiable.”

The original version of this story was posted online on Sept. 21, 2010.

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.

News Story

Your Candidate Won, But So What?

The following is an edited version of remarks delivered by Mackinac Center President Joseph G. Lehman to nearly 300 guests at the Townsend Hotel in Birmingham on Oct. 14, 2010.

What if most of the political prognosticators are right and November 2 turns out to be a very, very good night for Republicans? Or maybe I should be asking, so what if they’re right?

Maybe I’m a killjoy to ask “so what” when Republicans have lots of reasons to expect some spectacular political victories. But I maintain “so what” is the very question Republicans need to hear, along with everybody else.

That’s because their victory won’t translate into better policies if they behave the same way they did the last time they were in power. Election victories don’t automatically translate into policy victories.

Nearly everyone here can remember 1994 when Republicans swept into power at a political moment similar in many ways to this one. Republicans eventually controlled the Congress and the presidency, just as, in Michigan, they came to control the governorship and both houses of the legislature.

But the policy accomplishments did not match the campaign promises. Government did not shrink. We did not become more free. Instead the growth of government — federal and state — slowed in some narrow corners, but it still grew overall. By the time Republicans began growing government as fast as the Democrats they had campaigned against, the voters put them out on their ears.

And so here we are again, sixteen years the older and wiser. Republicans are still better campaigners than most Democrats on the virtues of free markets and limited government. But how long can we afford to wait this time to find out if they’re better at keeping their promises than they used to be?

In 1994 Republicans had been out of power for so long it was possible to believe they would automatically pursue their trademark free-market policies once they gained power. It was also possible for the Mackinac Center’s founders in 1987 to believe that making the intellectual case for free markets with high quality studies and reports would persuade lawmakers to enact wise policies.

Today we know that which is necessary is not always sufficient.

That’s why we’ve added important new tools to our portfolio at the Mackinac Center. We’ll always be the ones to do the studies and reports that tax-funded universities and special interest groups will never do.

But now we don’t just send our ideas to lawmakers and the media. With new strategic tools built around government transparency and Internet communications, we are increasingly being the media, and thereby reaching directly those citizens who are the most civically engaged.

Why does this matter? For two reasons. First, it’s because government transparency upsets the old way of doing things in the legislature far more than most people realize. In the old days, voters were almost totally dependent on an incumbent’s campaign literature to get information on how the lawmaker actually voted.

Today, our online, searchable database called MichiganVotes.org, lists every vote, of every lawmaker, on every bill. There’s no place to hide any more.

Want to know the three Republicans who put the last tax increase over the top? They won’t mention those votes in their speeches back in the district, but we post votes and name names right at MichiganVotes.org.

The second reason our new strategy matters is because the people who are the most civically engaged have disproportionate influence on policy making. A stack of Mackinac Center studies a foot high won’t persuade as many lawmakers as will a few phone calls from voters in the lawmaker’s district.

So we’ve built our own media operation. Our newspaper, Michigan Capitol Confidential, goes to tens of thousands of engaged citizens. The email version goes every day. Now, when we publish a study, we combine it with an investigative report on the subject, a short video, a newspaper story, and the related legislative activity.

Government transparency, and direct communication with citizens, makes a difference. One Oakland County lawmaker — a Republican — asked us to publish his written apology for cosponsoring a bill after our newspaper exposed the cost of providing state police escorts for the funerals of former lawmakers.

Another Republican substituted a better bill after we pointed out his original bill would have opened a back door for the forced unionization of home health care workers.

His bad bill dogged him during his recent congressional campaign, which he lost by a very narrow margin to a Tea Party favorite.

As bad as the current economic crisis is, it’s delivered a once-in-a lifetime opportunity to get the country and the state back on track. Citizens are engaged at extremely high levels, and it’s not just engagement in partisan politics.

It’s much more than the old Red Team/Blue Team stuff. It’s as if the citizens have figured out what G. K. Chesterton meant when he said, “The business of Progressives is to go on making mistakes. The business of Conservatives is to prevent the mistakes from being corrected.”

It seems the people have never been as savvy as they are now about the emptiness of campaign promises and the Republican/Democrat labels. They want results and they seem to be ready to hold lawmakers accountable once they get to office. When they do in Michigan, we’ll be helping them with tools like MichiganVotes.org and our Michigan Capitol Confidential news service.

So what if your candidate wins next month? It won’t mean a thing if the only people he or she gets pressure from after the election are the unions and all the other friends of big government.

November is a starting line, not a finish line. Now more than ever, I’m sure the folks who believe in free markets and individual liberty are going to make their voices heard after the election, and I hope that includes all of you.

Thank you.

Joseph G. Lehman is president of the Mackinac Center for Public Policy.

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.