Michigan tax incentives for film production produces uncertain results, corruption, and political dispute
Michigan can use all the jobs and economic investment it can get, and state officials believe they can secure some of it by trying to turn the Great Lakes State into the Hollywood of the Midwest.
To that end, Michigan has enacted a series of tax incentives designed to lure film producers to make movies in the state. The result of the incentives? Some movies, and no small amount of discord.
The results, in terms of actual projects attracted, are hard to quantify since the incentive only went into place in April 2008. In order to qualify, the project must spend at least $50,000 in the state (but can’t pay any single employee more than $2 million), and has to meet a bunch of other requirements as far as Michigan residents working on the project.
If you qualify, you get a 40 percent refundable tax credit, across the board, on Michigan expenditures.
There have been some significant films made in Michigan, including the Tom Hanks film “Road to Perdition” and Eminem’s “Eight Mile,” but they were made before the incentives went into effect. The Michigan Film Office reports a major uptick in Michigan-based films starting in 2008, but most of them are obscure works made by local production houses. The most significant was the Clint Eastwood film “Gran Torino.”
But the film incentives have produced other things as well – namely, corruption and political dispute.
Ada resident Joseph Peters was recently charged with a felony for allegedly perpetrating a pretty sophisticated attempt to defraud the state out of $20,000, claiming he had purchased a facility for $40 million for use in a feature film. That caught the attention of the Midland-based Mackinac Center for Public Policy — a free-market think tank that is known for questioning public-sector incursions into the private marketplace.
Scholars at the Mackinac Center began asking questions about the facility Peters purchased, which is known as Hangar42. For one thing, the latest appraisal of the property had put its value at $10 million, not $40 million. For another thing, there was no evidence that any transaction had actually taken place.
Once the Mackinac Center raised its concerns, the Michigan Film Office quickly backed off its support of any project that might be produced at Hangar42, and claimed the system worked because Peters never got a dime.
Neither have the many local advertising agencies that produce commercial work in the state, and they say that’s the result of a ruling by Democratic Gov. Jennifer Granholm’s Department of Treasury that is not consistent with the spirit of the legislation.
Bill Ludwick, CEO of the Southfield-based ad agency Campbell-Ewald, also serves as chairman of the Michigan Film Coalition. He has been trying to persuade the administration to change its interpretation of the law — thus far without success.
“If we can convince the State of Michigan to allow commercial production to enjoy the same incentives they give to producers in Hollywood, we’ll unleash a huge industry in Michigan,” Ludwick said. “Treasury is interpreting that it’s to be for feature films only, but that’s not true. So I think someone has to tell Treasury how to interpret the law.”
Perhaps the most high-profile uproar surrounding the law involves Michigan-born left-wing filmmaker Michael Moore, who is likely to receive between $650,000 and $1 million from the state for making the film “Capitalism: A Love Story,” in Michigan.
One of the capitalistic practices Moore criticizes in the film, by the way, is the use of tax breaks to spur economic activity.
This story is by Dan Calabrese.
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