It’s a Bird … It’s a Plane … It’s Terrible Tax Policy!

Paying to have the next Superman movie filmed in Detroit is a bad investment.

Annie Buonocore, left, and Lizette Dareau, both 20, look at items from the DC Comics booth under a large Superman drawing at the WonderCon 2009 convention in San Francisco, Friday, Feb. 27, 2009. The convention will run through Sunday, March 1, at the Moscone Center South in San Francisco.

Is Detroit in such desperate straits that only superheroes can save it? That may be the opinion of the Michigan Film Office, which announced yesterday that it is set to expend $35 million to have the next Superman movie filmed in the Motor City.

According to the Film Office's statement, the movie – which will unite Henry Cavill's Superman and Ben Affleck's Batman on the silver screen – will provide some 400 jobs as well as millions of dollars in spending at local hotels and shops. Win-win for a city that's down on its luck, right?

Sadly, probably not. The track record of film subsidies, which have become hugely popular in recent years, is pretty weak. "It's too little bang for too many bucks," Robert Tannenwald, a professor at Brandeis University who has studied the effect of film subsidies, told U.S. News' Tierney Sneed. "It would be more effective for the government to just write a check to everyone."

[See a collection of political cartoons on the economy.]

According to a study Tannenwald did in 2010 for the Center on Budget and Policy Priorities, film subsidies are a bad use of state funds, resulting in temporary jobs that often don't go to the state's residents, while rewarding producers for filming in places they likely would have filmed anyway:

State film subsidies are a wasteful, ineffective and unfair instrument of economic development. While they appear to be a "quick fix" that provides jobs and business to state residents with only a short lag, in reality they benefit mostly nonresidents, especially well-paid nonresident film and TV professionals. Some residents benefit from these subsidies, but most end up paying for them in the form of fewer services – such as education, healthcare and police and fire protection – or higher taxes elsewhere. The benefits to the few are highly visible; the costs to the majority are hidden because they are spread so widely and detached from the subsidies.

Several other studies, in places as far-ranging as Louisiana and Rhode Island, have concurred with these findings. Louisiana's chief economist found that the economic activity film subsidies generate only offsets 16 to 18 percent of their cost. Similarly, the New England Public Policy Center at the Federal Reserve Bank of Boston found no evidence that film subsidies are worth the money spent on them.

[See a collection of political cartoons on the budget and deficit.]

Even Michigan's own Senate Fiscal Agency released a report showing that, "As is true for most tax incentives, the film incentives represent lost revenue and do not generate sufficient private sector activity to offset their costs completely." And as more states get into the film subsidy game, the amounts paid out go up, while the already paltry return on investment goes down.

This isn't only way in which Michigan is attempting to use subsidies to breathe economic life back into Detroit; it's also paying hundreds of millions of dollars to help build a new arena for the National Hockey League's Detroit Red Wings, in the hope that jobs and economic development will follow. But these sorts of tax incentives are just bank-shots; they involve giving money away to wealthy film producers, sports franchise owners or other well-off businesspeople and hoping that the benefits trickle down. The people who ultimately shoulder the cost are those who depend on whatever service got shortchanged to fund the subsidy program.

Detroit obviously needs a ton of help, but its problems stem from an overreliance on a particular industry, too much sprawl and a precipitous decline in population, not a lack of hockey arenas or too few Batmobiles on the streets. It's going to take real economic development – not the Man of Steel – to turn it around.

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