The Contradictions Found Within Film Tax Incentives
Exploring the contradictions that tax incentives create for film workers, independent filmmakers, and beyond.
Michigan, which used to have a tax incentive that got canned by Gov. Rick Snyder, currently is 1 out of 41 states that do not have one. Tax incentives are a strange thing I’ve been trying to understand more about since they represent many contradictions: the creation of film jobs in various states; the money into the pockets of producers and studios; precarious work as studios look for the best incentives; and the continual devastation of the film economy in LA. The surface level speak about them is that they create jobs and boost the local economy. So, how do they do that? Every state that has tax incentives has them structured differently. You can view a list here.
Since Michigan has no tax incentives, a group known as the Michigan Film Industry Association (MiFIA) has been lobbying the state government to reinstate a tax incentive program. Their original goal, when I went to one of their events, was to have the bill passed by the end of 2024. I’m not sure what happened but they failed to meet that goal. Naturally (or, perhaps unnaturally) they must package their bill in the neoliberal mode so that the state government even thinks about putting its hands on the bill. That is, we can’t just have state funding go directly to local artists and filmmakers. Allegedly, the bill has a wide range of support among both parties.
MiFIA breaks down the details of their bill on their website, but the main thing I want to draw the attention of my readers to is the concept of the transferable tax credit from Wrapbook, “Transferable refundable tax credit: With transferable tax credits, the state does not issue your production a refund check, but rather offsets your in-state tax liabilities. Productions that don’t have in-state tax liabilities can transfer their tax credits to a local company by selling it on the open market for a percentage of its value.”1
The tax credit, which is assigned to the production company based on a certain amount of spend, becomes a commodified asset that they can then sell to a local (state who issued the incentive) business. This generates a marketplace for them to sell the tax credit at around 80 to 90 cents on the dollar. It’s important to note that the old Michigan program was a direct rebate to production companies issued in cash. Hollywood production companies came into town, spent a certain amount of money, and got a cash rebate for filming in the state. It’s no wonder Michigan Republicans axed this bill. They, of course, have a culture war to fight Hollywood elites; we have a class war.
How different is the transferability of the new incentive though? It’s very different for a neoliberal government. They’re not willing to write a refund directly to production companies, but they are willing to create a marketplace for tax credits. So now a Michigan company can buy say $1,000 worth of tax credit for $800 to reduce their tax bill by $1,000, effectively saving them $200.
The MiFIA bill proposes a $125 million tax credit for the first year, meaning, if all tax credit was issued, the state budget is covering $125M in taxes to businesses. Let’s say that all of the $100M allocated to feature films and TV shows was spent. Keep in mind that qualified feature film spending is proposed to be $300K per year. It’s the first year and the market is tepid so production companies only end up selling at 80 cents on the dollar, still saving an overall $80M. I’m assuming here that production companies producing feature films are more likely to sell their tax credit than use it, especially since they are more than likely not based in the state of Michigan if they are spending at least $300K on a film in one year.
Now, the budget itself is not fully a qualified expenditure. MiFIA breaks it down like this:2
30% incentive credit for qualified Michigan Residents.
25% incentive credit for qualified Michigan-based vendors.
20% credit for qualified non-resident personnel expenditures.
An extra 5% credit for qualified personnel expenditures on minority persons, women or disabled personnel or on hired Certified Business for Minorities, Women or Persons with Disabilities Owned Qualified Michigan Vendors.
Additional 5% credit for Advertising Commercials, Corporate Videos and Commercial Photography that use an approved Film Office Alternative Marketing Opportunity.
$500K salary cap per person per project.
How much of the incentive a film production receives is based on how crafty the producer is. Taking a $1M film, where the production company is based in LA but filming in Michigan. A very common occurrence in Michigan now and even more common in states with a tax incentive. They want to maximize their incentive but also have above-the-line crew and actors from LA they want to bring in. So, some rough, and I mean rough numbers here since I’m not going to break down a whole budget.3
$300K on in-state crew (30% = $90K)
$100K on out-state crew (20% = $20K)
$300K on actors, director, producer (20% = $60K)
$100K on qualified in-state expenses for MI vendors (25% = $25K)
$100K in post-production, but they’re not doing that in MI
$100K contingency
This totals $195K in tax credits. This might be egregiously off since I’ve never been involved in this process or worked on anything near this level, but it’s not too far-fetched. This is why productions shoot in states with great tax incentives like Georgia all the time. This production is not from Michigan, and they just spent a massive amount of money in one year greatly offsetting their tax bill, so they are going to sell their credits. They’re selling at 80 cents on the dollar. This means they walk with somewhere around $156K. There’s probably some sort of brokerage fees or something. This production has done well, they can pocket that money or reinvest it in the film. Who knows, it’s now out of the state of Michigan. Michigan businesses save money on their taxes; $300K in pretax wages were dolled out to MI film workers; local businesses (hotels, restaurants, grocers, hardware, etc.) were stimulated; the producers saved money; and the state stimulated the economy. Everybody wins, right?
Surely, from the perspective of bourgeois economics. This is where I wrestle with tax incentives: On the one hand, they help create a film industry in Michigan and potentially keep talented film workers and actors from leaving which is a definite problem, but on the other hand, exploitation is the same no matter what state it’s in and work is never a guarantee. I would also like to point out, before my critique, that I’m not opposed to MiFIA per se, or a tax credit in Michigan, in general, like this conservative garbage from Mackinac Center for Public Policy.
First, while building up industry, they only do so in a precarious nature. As mentioned, 41 out of 50 states have tax incentives, not to mention the tax incentives of other countries which creates competition between each state. It should go without saying but producers coming into the state do not care about the state, they care about producing their film as cheaply as possible and will go anywhere to do so.
Take the current conditions in LA. In recent years productions have flocked to cities like Atlanta to take advantage of their extremely competitive incentives (no annual cap, a breezy easy 20-30% for all payroll and local expenses but everything production and post-production must be in Georgia). LA was already in population decline but “the fires have made a desperate situation worse,” writes Stay in LA, a coalition trying to keep film production in its “ancestral home.”4 California Gov. Gavin Newsom already had a bill to raise tax incentives to $750 million, but Stay in LA proposes an uncapped incentive over the next three years, and a pledge from the studios and streamers to have at least 10% of production in LA.5
As other states fight for a better film industry, LA fights to keep the industry’s centralization. This reveals a contradiction. The capitalists can float from state to state getting the best deal, but film workers nationwide suffer. Michigan creates competition with LA. LA production companies come to film in Michigan, leaving behind their below-the-line crews but not working with Michigan’s actors, directors, and other above-the-line crew. The production leaves Michigan and we await our next exploiter. Meanwhile, film workers in LA can no longer afford to live there with the precarious nature of the work, so they look for work in other booming states. LA has struggled with exiting industry before most brilliantly described by Ruth Wilson Gilmore in her book Golden Gulag. The exit of, the once burgeoning war materiel manufacturing industry during WWII, created massive surplus populations, many of which were black workers, who were later criminalized and turned into the state’s massive prison population. While many film workers have more opportunity to leave, those in other industries that film supports will suffer, namely the most disenfranchised black and Latinx workers who don’t get to partake in the fruits of the extremely white industry.
Competition in capitalism creates surplus populations. This is why the unemployment rate can never be zero percent since capital depends on the supply and demand of the labor market as a matter of wage suppression. Marx writes extensively on how capitalist accumulation creates surplus populations:
If a surplus population of workers is a necesarry product of accumulation or the development of wealth on a capitalist basis, this surplus population also becomes, conversey, the level of capitalist accumulation, indeed it becomes a condition for the existence of the capitalist mode of production. It forms a disposable industrial reserve army, which belongs to the capitalst just as if the latter had bred it at its own cost. Indpendently of the the limits of the actual increase of population, it creates a mass of human material always ready for exploittion by capital in the interests of capital’s own changing valoritzation requirements (italics mine).6
Hollywood will always search for the lowest price, at the expense of anything and anyone. The logic of accumulation requires that capital must always be extracting as much profit (valorization), as possible, at any given time. State-to-state tax incentives help create this surplus, ready and willing to be exploited by Hollywood, only to, inevitably, be left when a greater potential for profit comes along.
Secondly, film tax incentives operate similarly as trade unions do in reinforcing bourgeois ideology. Often marketed as pro-labor bills,7 they reinforce capitalism and exploitation as large corporations and production companies go from state to state, exploiting the populations and then leaving. They do nothing to disrupt capitalist modes of filmmaking or create a politicized labor struggle. In What is To Be Done, Lenin describes how trade union struggles alone operate as bourgeois ideology because “trade unionism means the ideological enslavement of the workers to the bourgeoisie.”8 This does not mean that trade unionism is not a tool that the working class and revolutionaries should use, but unionism, without radical politicization, reinforces bourgeois ideology by not embracing socialist ideology. Film unions very much operate in this mode, but this is far beyond the scope of this article.
Film tax incentives, coming out of neoliberal ideology and not simply bourgeois ideology exist in a purely capitalist arrangement between government and business. This is the conceit of neoliberalism. Another example is how the US Federal Government subsidizes insurance companies but we do not have universal healthcare. By becoming a tax incentive, these state dollars do not go directly to workers or even to film productions. They become another form of state-sanctioned exploitation.
The spin of the pro-labor tax incentives is pro-labor only in the sense that it temporarily pays film workers. This is the distorted view of “jobs” in capitalism, especially creative jobs. Film work is really glorified gig work. You compete for a limited number of jobs in one of the most over-saturated industries, one also known to take advantage of its “glamour” to exploit entry-level workers even further. This reinforces the grip that capital has over labor.
Thirdly, tax incentives further commodify the art of filmmaking while also restricting the kinds of films that can be made. The higher a film budget gets, the more investors are involved, and the higher the stakes of recoupment are on the filmmakers. I am speaking here, directly, about independent filmmaking. Hollywood blockbusters are going to come in and pillage as stated above. Speaking utopically, I want a regional independent film scene thriving on locally made films. I want this everywhere, in every region, all across the world. A Detroit scene, a New York scene, a Nashville Scene, an Oklahoma scene, and so forth.
Independent filmmakers are well-attuned to finding money, even in precarious places, to get their films made. John Cassavetes took out a second mortgage on his house. Many a micro-budget filmmaker has maxed out a credit card. Taking advantage of film incentives seems like a place where indie filmmakers could thrive, plus the state would be fostering a genuinely independent art movement. The problem is that tax incentives often have a minimum spend. For example, the proposed incentive in Michigan has a $300K minimum for feature films. California has a $1M minimum. Those in the upper echelons of filmmaking scoff at making a film for less than a million, meanwhile, we down below may only ever make a few million in our entire lifetime, if that. Without investors or equity funding, independent filmmakers cannot even benefit from tax incentives.
This forces the logic of Hollywood realism I’ve discussed before. Not only do filmmakers need to pre-format their films into a certain kind of commercial (Hollywood) product, but they need to do so before even making the film. It’s one thing to spin an art film a certain way to attract viewers; it’s another to water down themes, search for name actors, force a film into a certain genre, etc. to receive investment.
This is before we even get to a kind of revolutionary cinema working not only in artistic freedom but aimed at politicizing audiences, radicalizing them, and using art as a weapon. This is a film rejecting commodification and commercialization. Getting these kinds of films made is a matter for another time but cinema is the most expensive art and to produce it requires money and labor, getting it seen requires even more.
Film incentives are, at the end of the day, incentives that incentivize the exploitation of various populations that must compete against each other. They do not work outside of the capital-labor binary and thus do not create a political struggle for collective ownership of filmmaking means. They’re opportunistic measures that do not secure long-term work in the film industry, for anyone, even those in LA. While I want more film work in Michigan, I struggle with tax incentives as a way of achieving that long-term or developing a local, radical, thriving film scene.
Wrapbook. “Film Industry Tax Incentives: State-by-State (2025), https://www.wrapbook.com/blog/film-industry-tax-incentives#:~:text=Transferable%20refundable%20tax,of%20its%20value.”
MiFIA. “About the Multimedia Jobs Act, https://mifia.org/multimedia-jobs-act-details.”
To see what some numbers looked like in Michigan during the tax credit era, check out this report: https://sfa.senate.michigan.gov/Publications/Issues/FilmIncentives/FilmIncentives.pdf, pg.12.
As spoken by Sarah Adina Smith in an interview about the Stay in LA petition. There’s a lot to unpack about LA being the “ancestral home of cinema” save for the fact that it’s simply not true and only home to a certain kind of cinema.
Stay in LA. “Stay in LA, https://www.stayinla.org/”
Karl Marx. “Capital: Volume One, Vintage Book Edition, 1977.” pg. 784.
MiFIA’s tagline is “Pro Jobs. Pro Economy. Pro Michigan.”
Vladimir Ilyich Lenin. “What is to Be Done, https://www.marxists.org/ebooks/lenin/what-is-to-be-done.pdf.” pg. 28.