The United States spent $25 billion to attract Hollywood. Is it worth it?

Michigan desperately wanted to change the look of Hollywood. For $500 million, the studios were only too happy to help.

When the state began writing checks in 2008 from one of the country’s most generous film incentive programs, productions poured in, box office hits like Clint Eastwood’s “Gran Torino,” Sam Raimi’s “Oz the Great and Powerful,” and “Batman” directed by Zack Snyder. vs. Superman: Dawn of Justice.

Then Michigan did the math.

After a state economist determined that “movie incentives represent lost revenue” and that their economic benefits were “negligible,” Michigan, which had cut funding for police and schools while facing severe budget shortfalls, eventually decided to end its incentives.

As the show gradually wound down, “The Avengers” moved to Cleveland, and “Iron Man 3” moved to Wilmington, North Carolina. Even the movie “Detroit” was filmed in Boston.

Now, nearly a decade after the state stopped paying Hollywood, lawmakers believe they can no longer afford not to.

“We’re not on a level playing field,” said Dayna Polehanke, a state senator and one of the sponsors of legislation that would put Michigan back in the fierce competition with dozens of states trying to attract studios. “We’re not even in the game.”

Supporters say the more carefully designed program will work better than the previous one, creating jobs and stimulating spending. But economists have long been skeptical about the value of movie and TV subsidies, saying they have plunged state governments into a race to the bottom in which the biggest winner, by far, is Hollywood.

A New York Times poll showed that states have distributed more than $25 billion for movie incentive programs.

“You can find an almost unlimited number of better uses for the same dollars,” said Michael Tom, a tax expert at the University of Southern California, whose work has criticized the incentives. “Who’s to say: Keep giving money to Hollywood; my child’s school doesn’t need new books?”

Even with the reconsideration of public support for private industry, 38 states now allocate taxpayer money to film and television production. Arizona, Indiana, Kentucky, Missouri and West Virginia have all offered programs in the past two years. Like Michigan, Wisconsin has introduced legislation that would restore its program.

Many of these states hope to become next Georgia, which has emerged as a dynamic film hub, while spending at least $5 billion on its program. New York has doled out more than $7 billion to attract productions from California, which has doled out more than $3 billion to try to retain them. The state of Louisiana, an early catalyst for this arms race, injected $3 billion of its own money.

But independent state fiscal monitors often found meager returns on investment. A recent report prepared for Georgia’s state auditors estimates that the tax revenue on every dollar spent on incentives is 19 cents. A similar report from New York determined that the yield ranged between 15 cents and 31 cents.

The New York State Department of Taxation and Finance concluded that “the film production credit is at best a breakeven proposition, and most likely represents a net cost” to the state.

Chiquita Banks, a lawyer who managed tax incentives for Disney, Fox and Viacom, said the studios have deftly navigated the current system. She said a major project might film in Hungary and the state of Georgia before handling VFX in New Zealand and post-production in Canada, taking on a variety of incentives.

“Why would you leave money on the table that the government wants to help you with, in order to film in their jurisdiction?” Mrs. Banks said.

Industry advocates say the investments are worth it. Tax money can successfully attract enterprises, and government funding stimulates other economic activities. Production companies pay catering companies to feed workers, hoteliers to house their crews, and dry cleaners to do their laundry — all of which creates a ripple effect.

Outside experts say the effects of such spending are overstated and that the initiatives are too costly for state governments. But their academic credentials compete against the promises of lobbyists, the allure of Hollywood stars and exclusive parties.

Jim Runestad, a Michigan state senator who opposes the proposed tax breaks, recalls being wined and dined at the residence of a famous producer in 2015, just before the state eliminated film incentives.

“They had a carving station where you could carve anything you wanted, all the best food and drinks you could imagine,” Mr. Runstad said.

Sometimes, the intimacy between politicians and producers was evident on screen. When the main characters of Batman v. Superman, played by Ben Affleck and Henry Cavill, for the first time, discerning viewers can also discover a man with less obvious powers.

The man was former Senate Majority Leader Randy Richardville, who helped push the incentive program that gave Warner Bros. $35 million to film in Michigan.

Weigh the costs

After Michigan began supporting the film industry, some areas tried to capitalize on it. The struggling Detroit suburb of Allen Park has sold $31 million in bonds to transform a site formerly occupied by an auto parts manufacturer into a movie studio it hopes will employ thousands. When the project collapsed in 2010, the city was deeply in debt, and the salaries of police officers and firefighters ended up being cut.

“The city has been taken advantage of,” said Sgt. Grant Pace, a firefighter, took a 10 percent pay cut, “and that hurt our wallet.”

Independent studies have found that even when films are produced, incentive programs have had little impact on job creation and economic development. Researchers say each job created by these programs could cost taxpayers more than $100,000.

“If we funded 30 percent of the cost of building toilets, Georgia would become the toilet capital of the world,” said J.C. Bradbury, an economics professor at Kennesaw State University in Georgia who has studied the state’s program.

He continued: “Of course we watched the filming here.” “But the returns on it, I think it’s pretty clear, are zero to negative“.

The film industry argues that evaluating incentives based on a simple tax-dollar-for-tax-dollar analysis fails to capture their prevalence. Economic development programs are not intended to increase government revenues, and they are rarely expected to pay for themselves.

Reports requested by the industry, state film offices, and other economic development agencies consistently find widespread benefits ranging from $6 or $7 in “economic value” for every dollar invested in a film incentive program. Even a skeptical auditors’ report on Georgia’s program, which found it was a loss to the state in revenue, acknowledged that the program also “stimulates significant economic activity.”

Although film projects typically bring together workers for a short period, incentives have generated enough activity in some places, such as Atlanta and Albuquerque, to create long-term infrastructure.

Supporters say the best evidence that incentive programs work is the fact that states like Michigan are still pushing for their adoption. Lawmakers on both sides of the aisle have embraced these programs for years.

“We are a vital American industry, both economically and culturally, and we could not be prouder of the career opportunities our industry supports in all 50 states,” Cathy Banuelos, senior vice president at the Motion Picture Association, said in a statement. .

“math trick”

Competition between the states intensified after Louisiana boosted its incentive program in 2002, when concerns were growing about production fleeing to Canada. Michigan joined the fray in 2008, luring filmmakers with a tax break of at least 40 percent of production costs.

Under this program, studios often end up with state money that they can use however — and wherever — they want. Supporters of the new proposal in Michigan insist it would close loopholes and, through the use of an incentive known as convertible tax credits, keep more taxpayer dollars at home.

Movie studios that parachute into the state to shoot often leave with little corporate income tax liability, meaning the state tax break doesn’t do them much good.

That’s why many states, including Georgia, offer transferable tax credits. When studios sell these vouchers to state taxpayers, often at a slight discount, the studios cash out while the buyers get a modest tax break. The end result is that the state does not collect the huge amounts of tax revenue it is owed.

In a review of public records from other states that offer transferable tax breaks, the Times found that money intended to entice film and TV studios often extends to companies with limited ties to the entertainment industry, such as Walmart, Dr. Pepper and Verizon.

The production company behind The Trial of the Chicago 7, which aired on Netflix, spent $17.2 million producing the film in New Jersey. The project received a $5.2 million tax credit that was sold to Apple Inc. For $4.8 million.

The opacity of the process can make it difficult to determine how much revenue a state is giving up. Tax experts say this makes these programs more politically palatable.

“It’s a mathematical trick to cover the eyes of Michiganders,” said Patrick Patton, an assistant professor of economics at Tulane University who has published studies on movie incentives.

And in Illinois, public records show that Dick Wolf’s “Chicago” franchises have earned nearly $260 million in tax breaks in the past six years, with much of it sold to Comcast. Department store Kohl’s purchased more than 70 points of various products for a total of $10.6 million.

Some of the state tax credits intended to increase film and television production were purchased by people whose wealth made the credits worth buying: primarily Peng Zhao, CEO of Citadel Securities, who spent $13 million.

The research has been previously contributed Kitty Bennett, Alain Delaquiriere, Kirsten Noyes And Susan C. Beachy.