Monday, September 27, 2010

Michigan and Movies (Part 4): The Case for Tax Incentives

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The Toronto International Film Festival has become one of the most important film festivals in the world, particularly for films that hope to generate awards buzz and begin campaigns for Oscar nominations. It has also launched previously unknown films to box office and awards success including "Juno", "Slumdog Millionaire", and "The Wreslter" in recent years.

This year was no different this year as premieres included "The Town" starring Ben Affleck which topped the American box office it's opening weekend as well as the Oscar contender "Black Swann," directed by Darren Aronofsky.

What did stand out at the Toronto International Film Festival was the number of film premiering that were filmed in Michigan and the talent connected to those films. Five Michigan productions premiered at Toronto this year featuring stars Jennifer Connelly, Robert Deniro, Ed Harris Catherine Keener, Edward Norton, Clive Owen, Sam Rockwell, and Hilary Swank.

Without a doubt, Michigan would not be attracting top flight Hollywood talent if it were not for the film incentives program enacted in 2008 which offers some of the most generous film production tax incentives in the country with the intention of providing Michigan an economic boost.

While we will examine the costs of the program in another post, the tax program has certainly been successful in attracting TV and film productions. The Michigan Film Office estimates that more than $300 million will be spent on productions in 2010 which is a huge increase from the $2 million spent on productions in 2007, the year before the incentives took effect.

As a result, Michigan has seen the rise of a new industry as each production means new investments and jobs. The five productions ("Conviction", "Stone", "Trust", "Vanishing on 7th Street", and "What's Wrong with Virginia?") that premiered at Toronto this month, generated over a 1,000 jobs according to the Michigan Film Office.

Not only do the film productions provide a big boost to the hospitality and catering sectors, but new career opportunities in set design and construction, writing, acting, and various production roles are now available to Michigan residents that would not be available otherwise.

As more and more films are made in Michigan and the state attracts recurring television productions such as HBO's Hung and ABC's new Detroit 1-8-7, new investments in studios and pre- and post-production infrastucture will continue to be made and result in more permanent jobs.

Furthermore, many have called the program a success for how it has drawn attention and glamour to the down-trodden state including largely optimistic coverage in large media outlets including a recent Wall Street Journal article, on the impact of the program which goes beyond dollars and cents.

Please chime in with your comments and feedback. Do you know a Michigan business that has seen a boom from a nearby film production? Have you run into a celebrity in Michigan or gone to watch filming? Let us know and vote for your favorite film shot in Michigan on the right toolbar.

5 comments:

  1. It is nearly impossible to disagree with the fact that tax incentives have helped bring the film industry to Michigan. However, Michigan needs more than the film industry. Instead of providing incentive to a specific industry we should be providing incentive to all industries. This can be done by eliminating all business taxes. Consider it a specific tax break directed at business in general rather than to a specific business. If tax incentives work for the film industry then shouldn’t they work for all industries?

    I think that the bottom line is that businesses want to do business where they can maximize profit. They naturally look for the lowest combination of costs be they taxes, labor, supplies, etc. We will never succeed if we succumb to the mainstream idea that profit seeking enterprises are big evils seeking the ruin of the average Joe’s life. Profits are good. Businesses need to seek them in order to stay in business. If we seek to destroy profits then we will drive businesses away unless we can guilt trip businesses so well that they burn up their saved capital in the state until they go bankrupt. Even then we will lose in the long run.

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  2. Great points, Paul. We are going to continue to examine the film tax incentive program further. Next up will be an examination of the costs of the program on the state budget as well the cost per job created under the program.

    We'll wrap up the series with a general analysis and conclusion.

    The discussion will touch on tax incentives and gov't using tax incentives and subsidies to pick winners and losers.

    What else should we cover in the series?

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  3. I’d like to see an analysis of disincentives in industries that have left the state. As far as specific industries I would like to see analysis of the tax treatment of the auto industry, renewable energy industry, and the difference in treatment between the mom and pop stores and large businesses. I am very skeptical that small businesses are treated any better than large business. That’s my 2 cents.

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  4. http://www.forbes.com/2006/08/15/best-states-business_cz_kb_0815beststates.html

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  5. According to the Ann Arbor Area Convention & Visitors Bureau, the 4-day shooting of “Youth in Revolt” generated nearly $250,000 in revenue for local Ann Arbor businesses. (Conor O’Neill’s served food to cast and crew. Downtown Home and Garden sold sun hats and patio umbrellas. Sign-o-Rama printed signs for parking and set operations.)

    Ann Arbor continues to benefit from the film incentives. Read more: http://www.chadwiebesick.com/blog/2010/8/17/ann-arbor-marketers-benefit-from-growing-michigan-film-indus.html

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