As a bill to repeal Michigan’s film incentives moves forward, some lawmakers in the state legislature are now suggesting that the state renege on existing business subsidies, as well.
Michigan Live reported Monday that, “A bill that would put a stop to the state’s film incentive program made it out of a House committee last week,” but could face an uphill battle in the Senate should it pass in the lower chamber. (RELATED: Michigan Lawmakers Consider Repealing Business Subsidies)
Michigan started giving out film incentives in 2008, and the article claims those incentives are credited with “[supporting] the filming of big-ticket movies like Batman vs. Superman in Michigan.”
The sponsor of the repeal bill, Republican Rep. Dan Lauwers, told Michigan Live that it “makes no sense” to keep this $50 million expenditure in the budget when the state is facing a budget shortfall.
Republican Senate Majority Leader Arlan Meekhof, however, expressed displeasure with the House bill, which was not discussed with Senate leaders, saying, “Now they’ve made some confrontation and it makes it very difficult [to pass the bill].”
“Setting the film industry part of it aside, this is a contract and promises we made to folks that grow this industry here, and now they want to end it without it being matured,” Meekhof added. “We still support the car industry with different incentives, so I think this is rather short-sighted.”
Now, though, The Detroit News reports that, “Lawmakers on both sides of the aisle have suggested that companies” — including the automakers — “should be willing to forgo owed tax credits.” (RELATED: McAuliffe Sets Record for Business Incentive Deals)
The tax credits in question were issued through the Michigan Economic Growth Authority, which was created in the final years of Democratic Gov. Jennifer Granholm’s administration to encourage businesses to create and retain jobs in the state. But with increasing pressure to balance the budget, lawmakers are now beginning to balk at the cost.
“For the 2016 fiscal year, business tax credits are expected to cost more than $800 million,” the article claims, and the total cost of fulfilling the state’s remaining commitments is estimated at a staggering $9.38 billion over the next 16 years (when the last of the deals expire).
Democratic state Rep. Brandon Dillon, who supports the idea, argued that, “Everybody who has an interest in the state’s fiscal health should be willing to make some concessions just like state employees have done … in the last decade.”
“There’s almost $10 billion in credits out there,” Dillon said. “To suggest that … the value can’t somehow be reduced in a very, very modest way to help ease the pressure on the budget, I think is ridiculous.” (RELATED: NC Conservatives Resist Gov. McCrory’s Request for Business Incentives)
The most expensive tax credits, with an initial combined value of over $4 billion, were awarded in 2009 and 2010 to the “big three” automakers (General Motors, Ford, and Chrysler), but because the credits are based on wages, their cost has gone up in recent years “because of a profit-driven rise in payrolls” at the automakers.
“We don’t even know how big this could get because there are factors the government can’t predict,” said Republican state Rep. Cindy Gamrat, adding that lowering the payments made to businesses under the program is “the responsible thing to do.”
Not all legislators share that view, though, with some believing that Michigan should live up to its contractual obligations to avoid losing credibility with future partners.
“It’s inconvenient now that the credits are being submitted,” said Republican state Rep. Earl Poleski, but “they are contractual in nature, and to renege on a contract would be to call our integrity into question. I’d prefer not to see that happen.”
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