As a way to diversify Michigan’s ailing economy, the state government decided to fund a series to tax credits that would reduce the expense of filming in Michigan on a commercial scale. This was basically a state subsidy that would draw jobs in the movie and television business from the traditional media centers in New York and Los Angeles. As a result, Michigan began to develop somewhat of a media industry here. The tax credits were, essentially, a subsidy that would help the industry develop here until such a point when the industry would be fully established and able to turn a healthy profit on its own.
Gov. Rick Snyder reduced the program when he took office, saying that the expenditure of nearly $100 million annually in foregone tax revenue was not necessarily producing the necessary economic return. He reduced the amount downwards to about $25 million, and the result was a corresponding reduction in the number of film projects that took place in Michigan. The state government is now set to increase, for one time only, the size of the film credits, bringing next fiscal year’s total to $50 million.
Now, on principle, I’m not opposed to governments promoting and championing certain industries that would develop a strategic advantage on home turf. It’s basically a form of investment. It’s a slow process, and we’ve had lots of examples of it in American history. Up until the 1990s, America had erected high tariffs on manufactured products until it entered into the North American Free Trade Agreement, a prospect that was held off of for as long as possible until the benefits of a free trade deal couldn’t be forestalled. But for centuries, the federal government had basically given a subsidy in the form of an import tariff to manufacturing in the United States. And given its record, I’d say that was a pretty smart bet.
But with the film credits being increased for only one year, I doubt the long term effect that such a measure would have. If governments want to strategically promote certain industries, you have to be prepared to do so for the long haul, and to do so consistently. Developers in the film industry are not going to place Michigan high on their list of where to do business if the tax climate here is constantly shifting every couple of years. In order for this to succeed, the support has to be deep, it has to be consistent, and it has to be for the long term. Otherwise, this one time increase of $25 million dollars won’t amount to a hill of beans, economically speaking, and is money that could be well utilized in other places in order to foster innovation and entrepreneurship within the state.
Politically and economically, it’s like a fart in the wind. There for a second, and then gone.