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MI tax breaks debated as jobs tool

By Rick Pluta, Michigan Public Radio Network

http://stream.publicbroadcasting.net/production/mp3/wkar/local-wkar-931406.mp3

UNDATED –
The Number One job facing the next governor will be resuscitating Michigan's economy. The employment rate has been slowly improving, and Michigan's expected to see a small net gain in jobs next year. But it could take many years for Michigan to regain all the jobs lost over the past decade - more than 800 thousand. As we hear from Michigan Public Radio's Rick Pluta, one decision facing the new governor is whether tax breaks for businesses can pick up the pace of recovery.

AUDIO:
Pretty much every state uses tax breaks to lure businesses. It's hard to compare them because the incentives are all so different. Michigan has tax breaks for advanced battery manufacturers, alternative and renewable energy businesses, pharmaceutical and other life sciences companies - all identified by the state as growing sectors.

But Republican candidate for governor Rick Snyder says Michigan has grown too reliant on its incentives.

"The comeback of Michigan is not going to be attracting a few big out-of-state companies with incentive packages because basically all we're there is giving them a deal but increasing the tax rate on everyone else," he says.

Democratic nominee Virg Bernero says the incentives are working, and the proof is in how Michigan's unemployment rate has stabilized.

"I say we do what we gotta do to attract the jobs and I'm not going to let the jobs go away and have workers suffer on the altar of some philosophical principle. We've got be practical about this," he says.

Now, Snyder does say he would not end the tax breaks altogether, nor would he move quickly to upend the state's economic development efforts. That's because businesses want stability above all else.

And Bernero says every tax break needs to be examined to ensure it's creating jobs and is a bargain for taxpayers.

But what is a bargain for taxpayers?

No incentive is more generous than the state's enticement for filmmakers - a tax break of up to 42 cents for every dollar, depending on how much of the money is spent hiring Michigan crew members, caterers, and actors.

The horror film "Hostel 3" has taken over the basement of the massive Masonic Temple in Detroit. The "Hostel 3" crew is also digitally transforming the exterior of Detroit's historic, abandoned Michigan Central Train Depot into a casino in the Nevada desert.

Over in a corner, a remote crew monitors sound and video. The room is also filled with crates packed with props, such as ghoulish, bloody body parts made from molded rubber. Scott Putman is the executive producer of the third film in the "Hostel" series.

"They're kidnapping films," he explains. "They're horror films. Horrible. Awful. It's terrible. Not family entertainment at all and not something I'd want my daughter to go see."

Putman says the experience of working in Michigan has been great, but his movies and the others -- would not be here if it were not for the state's generous tax credits.

"Filmmakers are - we're business people," he continues. "We make entertainment, but we're still business people."

Putman says Michigan offered a better deal by almost a million dollars than its closest rivals, Louisiana and Georgia.

The film incentives are a bet by the state - that a burgeoning movie industry will help reboot Michigan's economy, shake its rust belt image, and keep young people from moving to other states in search of interesting jobs.

"My name is Ben Gordon and I am the assistant to the executive producer."

Hostel 3 is the third feature film Gordon's worked on. He says the film incentives kept him here after he graduated last year from the University of Michigan, and he has no plans right now to move.

"If the incentives are reduced or eliminated and the industry starts to dry up here, then I might be forced to, but as long as we keep making movies in Michigan, I plan to be here for it," he says.

But Michigan's incentives are so generous, taxpayers are subsidizing Gordon's job.
Economist Patrick Anderson says that's a bad deal because it adds to Michigan's ongoing budget challenges. Anderson did a study this year of Michigan's roughly three-dozen tax breaks aimed at attracting business and jobs.

"Some of them work and some of them really don't, and, clearly, in an environment as bad as it is now for Michigan, we need to concentrate on those that work and get rid of those that don't," Anderson says.

But supporters of the film credits say they are a good deal when you count all the benefits, including marketing and re-branding Michigan as the state looks to make itself more attractive to young people and to employers.

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