Monday, February 28, 2011

Michigan Film Incentives - Tangibles and InTangibles

The debate over the continuation or cancellation of the Michigan Film Incentives (that allows producers to apply for a 40-42% tax rebate on the dollars they spend in Michigan on a film) has heated up since the former president of Gateway Computer (Rick Snyder) was elected governor. In an attempt to lure business to Michigan the gov thinks it is wise to kill the incentive program in favor of a lower corporate tax rate.  That Gateway Computers moved from South Dakota (with a low corporate tax rate) to Irvine California (one of the highest and just 46 miles from Hollywood) provides an interesting and ironic interpretation. More on that at the end of this post.

What got me into writing this morning was, however, the leading question: "Why not give a 42% incentive for all businesses?"  The answer for me is very simple, and it leads to the Gateway moving to Hollywood conclusion. Here we go.

Why not a 42% tax incentive to all  businesses? Well, there are (at least) three (3) tangible characteristics, and two (2) powerful intangible characteristics to the MI Film Incentives that most other businesses don't have. If they do have these characteristics then perhaps they should get a similar incentive.


(1) Film Incentives attract cash that was previously OUTSIDE the local economy.

(2) The cash is spent QUICKLY.

(3) THE CASH is spent DIVERSELY (both geographically and in different industries or disciplines).

Those three tangible characteristics immediately begin to generate tax revenue through the dozens of tax channels the state has on the books (see turbine.pdf diagram). The more NEW cash in the engine, the more NEW taxes are generated as the money is spent over-and-over.

The tax turbine diagram is here:

With 18 months, BEFORE the state writes the incentive check, the money likely changes hands a dozen times. And each time it changes hands it's taxed in one way or another. That the state gets back every dime in some form of tax revenue, from the dozens of taxes on the books, cannot be proven. But the Ernst and Young report points to the eventuality, even if it takes another 18 months.

The model is that the money is generally NEW cash that was not in the MI spend cycle BEFORE producers brought it in from investors. This even works if the investor is from MI, because money spent on movies is NOT being actively cycled or taxed until the hundreds of people in the first and second spend-tier start spending it.


(4) The END PRODUCT.  Narrative motion pictures are the most powerful public relations device know in the history of mankind. A film Made in Michigan promotes MI through it's images and sounds on screen seen around the world for decades afterward. Made in Michigan movies (by their very presence in culture) promote not just tourism but also promote residency and business relocations.  Any business or organization (when it has the money) will turn to motion pictures to promote its ideas or products. The reason film is so powerful has a great deal to do with the characteristics of story and how ONLY STORIES are effective in passing down values from one generation to the next. As evidence of that see the three essays beginning here:

(5) The ON-GOING PROCESS. Imbued in the storytelling is the collaboration of every discipline known to man. Motion picture development, production and distribution requires a friendly, encouraging business climate. It demands hour-by-hour innovation, through work-diversity, teamwork, art, music and a thousand other disciplines. Movie production pulls together EVERY aspect of human endeavor like no other industry in the history of mankind. Money cannot buy the positive, life-fulfilling, motivation that the process of creating a motion picture generates.

The creative, intelligence, and innovative leadership that made California (with all it's at-times weirdness) the cultural leader of the country, and why Silicon Valley is in CA, along with Facebook, and GATEWAY COMPUTERS (Hint! Hint! Wink! Wink!),  is the result of the synergy created by the confluence of energized entrepreneurial mind-sets that are fostered through the motion picture industry. Like no other industry the film business pulls together EVERY conceivable discipline known to man and gets those diverse people to work together toward a common good, and in a quick manner. One of Tom Peter's rules for a successful business is to PROTOTYPE QUICKLY. That is exactly what the movie business does. Every movie is a prototype.

Nearly everyone involved in the production is an independent entrepreneur, working toward a common, innovative (never-been-done-before) goal. That brain power and initiative required for motion picture production carries over into every aspect of life outside the movie set, studio, or edit salon. And it raises-up the cultural and social fabric of EVERYTHING else in the community. Money can't buy that. But it comes naturally wherever movies are made. And that's why GATEWAY moved form South Dakota to Irvine, CA. It wasn't low taxes.

Question for Nancy Cassis and the small minds (at the Mackinaw Center) that want to count "employees" as opposed to "independent entrepreneurs":  Which would you rather have as the basis for your economy:  a bunch of employees that work 9-5 for someone else? Or A bunch of independent contractors that work 6 AM to 10 PM for themselves and with others toward an innovative and inspiring outcome? One mind set creates a labor intensive, assembly-line mentality. The other creates unstoppable innovation, new jobs, and unparalleled prosperity.

 Just remember, Gateway moved to California, just 46 miles from Hollywood.

Stan Williams
Michigan Producer

No comments: