Disney’s “Oz: The Great and Powerful” opened last week and is the number one movie in America, on track to becoming a financial success for the film studio. Unfortunately, the film is a big loss for Michigan taxpayers, thanks to the state’s generous film subsidy program.
The state reimburses approved filmmakers with a subsidy of up to 32 percent of expenditures in Michigan (down from 42 percent a few years ago). For “Oz,” Michigan taxpayers are subsidizing the film higher than the average price of a ticket: Michigan has 4.5 million individual taxpayers, and the state gave the film studio $39.7 million to shoot the movie in Pontiac. That works out to a subsidy of $8.82 per taxpayer while average ticket prices nationwide are $7.96.
The subsidy has been around for years with the program originally refunding up to 42 percent of Michigan expenses to filmmakers — essentially a check from the treasury to Hollywood studios. The program expired, but the Legislature, dominated by Republicans, overwhelmingly decided to keep it around.
Despite “conservatives” who claim to not like the government picking winners and losers and “liberals” who say government shouldn’t benefit large corporations and big business, Michigan politicians continue to spend taxpayer money on the program. The current state budget set aside $50 million for film tax credits and political leaders on both sides of the aisle are pushing for more.
In the past few years, the program has handed out tens of millions of taxpayer dollars for films like: “A Very Harold and Kumar Christmas,” “Iron Man 3,” “Transformers 3” and “Real Steel,” as well as the classic “House of the Rising Sun” (which went straight to DVD and was subsidized more than four times what the film made in sales).
The program has dished out money to a veritable Who’s Who of box office bombs: “The Genesis Code,” “Vanishing on 7th Street,” “Trust,” “Conviction,” “Alleged” and “Kill the Irishman” — all of which made almost no money in theaters or sales.
Most economists and researchers across the spectrum have found film subsidy programs to have a poor return on investment.
According to the Center for Budget Priorities, economic analysis of film subsidy and tax credit programs across the county have been almost unanimous that they are not worth the cost.
And for 2010-11, the Michigan Senate Fiscal Agency found that even among the most optimistic of assumptions, the film program brought the state only $0.11 per dollar spent. The subsidies cost Michigan taxpayers $125 million and returned $13.5 million in 2010-11.
Film subsidies are an expensive way for state lawmakers to look like they are “doing something” and they have the added lure of bringing Hollywood stars to the state. But the reality is that the program is a policy flop.
Jarrett Skorup is a research associate with the Mackinac Center for Public Policy, a free-market think thank located in Midland, Michigan. A version of this piece first ran at Capitol Confidential. Image of an empty theater courtesy of Big Stock Photo.
Source: AFF Doublethink Online | Joseph Hammond
Source: AFF Doublethink Online | Emma Elliott Freire