Posted on 03/14/2013 8:22:00 AM PDT by MichCapCon
In 2010, Michigan had an annual unemployment rate of 12.5 percent. Then-Gov. Jennifer Granholm told lawmakers to expect a $1.58 billion deficit in the following year and to expect a $263 per pupil cut for K-12 education.
Yet, the state played a part in allowing one of the most lucrative companies in the world to post a record $4.8 billion in profits by handing it nearly $40 million in film tax credits.
That was the year Disney made the movie, "Oz: The Great and Powerful," and received $39.7 million of the $75.2 million the state of Michigan handed out to film producers. Ironically, the state film subsidy nearly matched the $39.8 million salary Walt Disney Chief Executive Robert Iger was paid in 2012.
"Oz" was filmed in Pontiac at Michigan Motion Picture Studios, formerly known as Raleigh Studios. The movie officially opens on Friday.
While Disney went on to post a record profit, Raleigh Studios struggled. It has missed three payments to investors, which had to be paid for by the State of Michigan Retirement Systems. The state has paid $1.68 million in the last year and is on the hook for $18 million in bonds if the Michigan Motion Pictures Studios is unable to make its payments to bondholders.
Gov. Rick Snyder has proposed slashing the amount the state gives to filmmakers by 50 percent, cutting the $50 million cap to $25 million.
The company that applied for the Michigan film credit for "Oz" was Emerald City Film Inc. According to California’s Secretary of State, Emerald City Film Inc.’s CEO is Jim Kaperstein, who is the associate general counsel at The Walt Disney Co. Disney confirmed in an email that Kaperstein started Emerald City Film and the address listed with the business filing with the California Secretary of State is the same as Walt Disney Studio’s Burbank, Calif., location.
Disney got millions in federal aid in 2010, too.
According to Florida Watchdog, Disney received $110 million through a federal tax credit. The film credit came via the American Jobs Creation Act of 2004.
Those two tax credits led to a record setting year for Disney. The company’s profits shot up 21 percent to a then-record $4.8 billion in 2011.
In 2010, State Rep. Tom McMillin, R-Rochester Hills, spent hours sifting through receipts filmmakers put in for reimbursement from the state.
"Do you know what businesses have to make to pay $40 million in taxes?" Rep. McMillin said, referring to what other business had to pay for Disney to get the subsidy. "For Michigan businesses to pay $40 million, they had to lay off or not hire a lot of people. I don't like that it went out of the state and continued to enrich millionaires and billionaires with government subsidies."
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.
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.
Can’t blame Obuma for this one. I agree with O (only this time). Let’s get rid of this tax break.
While not a big fan of using this type of public tax engineering in the first place, the analysis is flawed in that it assumes that the alternative case would be for Disney to make the film in Michigan under the existing tax rates. Simply put, if they didn’t get the tax incentives they would have made the film elsewhere and Michigan would have seen no tax revenue at all. The idea that it “cost” the state $X is false.
The answer lies in reducing tax rates on all businesses to a level where it makes sense to locate your business in a particular state.
Nor can you blame Disney for taking advantage of the credits. On the whole, I’d prefer the federal and state governments keep their hands off business rather than punishing and rewarding certain behaviors.
There are subsidies, and then there is tax abatement.
If you work at a good paying job and pay taxes, and your neighbor runs a small business, makes what you make, yet gets tax abatement because he employs several people, is it fair to you?
Remember that he not only pays his own taxes, but his employees pay taxes as well. So all told, his actions produce far more taxes than you pay.
However, if government pays him taxpayer money as a subsidy, it is a different kettle of fish, because even though it means he can hire more people who will then pay taxes, government is taking that subsidy out of *your* hide, to benefit government.
The problem is with picking winners and losers.
Basically I wouldn’t have an issue if all businesses got the same deal.
Thanks for the ping; post. DEFUND socialist collectives, foreign and domestic. Socialism Is Legal Plunder - Bastiat 1801-1850
BIG GOVERNMENT IS CRONY SOCIALISM
HOORAY State Rep. Tom McMillin, R-Rochester Hills!
What makes you think Obama is for ending these tax incentives to his liberal buddies?
So when i walk into the theater to watch it can’t I just tell the cashier to put the cost of the ticket on Uncle Sam’s Tab????
Since i paid for the ticwet anyways....????
That hard earned taxpayer money could be used to build something useful - like a new sports stadium!
Oz: The Great and Powerful - Ah more extreme originality coming from Hollywood. Multi-million dollar budgets and they can’t buy a dollar notebook to write something new. Now last week I heard they have a new TV show called “Bates motel”. Wow! Awesome originality! Where did they ever get that idea? Just a bunch of cocaine addled leftist schmucks who can’t be bothered to get off their arses to read new scripts.
In the mean time in Texas:
Austrian steelmaker announces $700M plant at Port Corpus Christi
New plant will bring 150 permanent jobs
Gotta admit, I really enjoyed this movie.
The stories of “taxpayer subsidies” regarding movie making are generally deceptive.
These are cases where a movie is looking for a place to film, and they don’t want to pay the high taxes that the state charges for businesses, and the state decides that a little money and publicity is better than none, so they waive the taxes.
If they didn’t, and the movie filmed somewhere else, they would still get no taxes, so they aren’t actually paying out money, or losing money.
Now, sometimes they will actually waive taxes from other businesses working with the movies that would otherwise be collected, or they might offer free police help which costs money. But generally, a state which allows a movie to come in “tax-free” comes out ahead on taxes because of things like sales and food taxes paid by all the people who are there to do the film.
In some ways, conservatives could use this to argue that even liberals know that taxes are bad for their economy, because they are so willing to waive them when it’s their favored businesses that are being hurt by the excessive taxes.
It is amazing that a movie might have to allocate 20% of their budget to paying various taxes a state would impose to “allow” them to come film, so it doesn’t bother me when a state reduces that cost.
This type of accounting is the same one liberals use when they say a tax cut costs money, that a tax cut counts as spending, and that people keeping more of their money is a gift from the government.
It pays to be a limo socialist CEO. That is why we have so many fascists rising to the top and sucking the life out of the US Treasury and economy.
The communists see the fascists as their central competition, once they have killed the constitutional Republic. For normal Americans - small businesses and workers - both are centralized power poison.
Small business vs big business incorporates so many other struggles, from ‘Kelo v. New London’, regular zoning law, the various laws and regulations based on the number of employees, that it kind of muddies the water.
Let’s just take the last one. Laws and regulations at the state and federal levels are stair-stepped based on number of employees, with greater numbers being more expensive and complicated:
1-14, 15-19, 20-49, 50-99, and 100 or more.
So the larger retail store gets a lot more especially federal taxes and regulations that the small store does not get. So if the state gives them abatement of state taxes to make up for their greater federal taxes, is that an unfair advantage over the small retailer who doesn’t have to pay those greater federal taxes?
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