Filmmaker Tax Subsidy Also Pays for Out-of-State Spending

The common understanding is that the Michigan film tax subsidy offers up to 42 percent of the expenses Hollywood movie companies spend while filming in this state. But an analyst for the Mackinac Center for Public Policy says the percentage charged to state taxpayers can climb even higher if one considers how much money is actually spent in the state by the filmmakers.

Fiscal policy analyst James Hohman took at look at the 2011 movie Frontier Boys. The movie was filmed in West Michigan and is about players on a high school basketball team who get entangled with the wrong crowd, leading to a drive-by shooting. There was $510,000 spent by the movie company while making the film. It received a $223,341 tax subsidy from Michigan taxpayers, or roughly 42 percent of the film’s total expenses.

But Hohman notes that $396,000 was spent in the state — what the Michigan Film Office calls “pure Michigan” spending. There was $115,000 spent outside the state, which includes such things as out-of-state film crews brought in for the project. Hohman said if you factor in just Michigan spending, the tax credits rises to 56 percent of the total money spent in state.

“We are incentivizing out-of-state spending,” Hohman said. “Other states are benefitting at Michigan taxpayers’ expense.”

Michelle Begnoche, spokeswoman for the film office, said there are other unmeasured advantages that aren’t captured in the “pure Michigan" spending.

Begnoche said out-of-state workers still have to pay state income tax on their earnings. And many in the crew receive per-diems that are not allowed to be credited for tax incentives. So much of the personal purchases go to benefit Michigan stores, she said.