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Two GOP governors plan to spare film tax credits

Critic says cutting elsewhere will not pay off

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In a time of major spending cuts, two Republican governors have said they'll spare film-industry tax credits from the budget knife, unlike Republican Gov. Rick Snyder of Michigan, whose proposal to ax them scared the film industry away from his state.

Republican governors Tom Corbett of Pennsylvania and John Kasich of Ohio both preserved the Film Tax Credit program in their recent state budgets, deciding instead to cut subsidies elsewhere, a move one tax expert says will not pay off.

"The biggest problem is [states are] using an extremely inefficient instrument … at a time when deficits are a problem," said Robert Tannenwald, Senior Fellow for the Center on Budget and Policy Priorities. "An industry that is so risky and geographically mobile — that is not the kind of industry that states should try to cultivate."

Under Mr. Kasich's proposed fiscal year 2012 budget released Tuesday, the Commission on Hispanic/Latino Affairs, Department of Health, the Ohio Environmental Protection Agency and the Department of Agriculture, to name just a few, would all see their current funding levels slashed. By exempting the film-industry tax breaks, the inveterate deficit hawk hopes to lure big-name Hollywood producers to film in his state — a hope that now looks realistic.

Earlier this month, the governor announced that Ohio had snagged Marvel Studios' next super-hero movie "The Avengers," which will bring popular actors such as Robert Downey Jr. to the state. The film's producers had earlier been eyeing Michigan as a location, according to the Detroit Free Press, but after Mr. Snyder announced his plans to cut out film tax credits by 2012, they backed away and decided to shoot in Cleveland.

Although Michigan has left its future as an attractive filming location in question, Mr. Tannenwald said other states would be wise to follow suit. The economic benefits of film tax credits are often exaggerated by proponents, he said.

"Yes, you see an increase in hotel bookings, business for carpenters, hairdressers … you see all of that," Mr. Tannenwald said. "But the bulk of the payroll for film shoots goes to nonresident, specialized film production talent, people brought in from Hollywood, New York City and other places. If a state is interested in developing and growing its economy long term, it should follow Michigan's example."

The proposed budget for Michigan must pass before film tax credits are eliminated. Until then, the Michigan Film Office is still accepting applications, but not approving them until the budget is settled, according to Michelle Benoche, the office's communications adviser.

"Our office was given directive to follow the proposed fiscal year 2012 budget," Ms. Benoche said. "We weren't given a clear meaning of what that means for our budget for 2011. In the meantime, we are accepting applications, but until we get that policy into place we are not approving the 43 pending applications."

The governor's proposed $25 million cap on film incentives comes on the heels of what Ms. Benoche calls Michigan's "biggest year" yet with the film industry. According to the Michigan Film Office 2010 Annual Report, 58 projects spent more than $293 million in Michigan, 5,310 Michigan workers were hired by productions, and more than $115 million was awarded in incentives by the state in 2010.

Maintaining that momentum won't be easy under the proposed $25 million cap.

"It's not how much harder," said Jim Burnstein, vice chairman of the Michigan Film Office Advisory Council. "It's impossible. I deal with Hollywood every day; they have written us off. If this stands, it's over, we're done. I believe that over time we would have had a very nice mix of projects coming in from Hollywood but also projects we would generate, like Michigan-based movies."

Mr. Burnstein, the screenwriting coordinator at the University of Michigan, said the governor's proposal also puts a damper on the dreams of many film students who planned to graduate and live in Michigan to begin their careers. They are lost talent that will now leave for other places such as New York and L.A. to find work, he said.

According to Mr. Burnstein, the film incentives have spurred the creation of thousands of jobs in Michigan since their inception. Although the incentives are given to producers, local hires are favored, and hotels, dry cleaners, clothing stores and local actors beginning careers benefit, he said.

"It's jobs, jobs, jobs," Mr. Burnstein said. "I've worked in this industry as a screenwriter since 1989. Everywhere I've gone, where I've seen it done right, it is great for the economy."

He said he is in the process with others of coming up with a proposed measure to amend rather than eliminate the film tax cuts, and he offered two thoughts regarding Mr. Tannenwald's advice that other states follow the governor's proposal.

"Show me where what he has proposed has worked. Show me the state that is doing that and how those states are booming," Mr. Burnstein said. "Your hanging up the 'closed' sign."

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