News Release: House Testimony Claiming Mackinac Center Support for Michigan Film Subsidy 'False,' Says Senior Economist

'Incentives' must be ubiquitous and market-driven

For Immediate Release
Wednesday, Nov. 18, 2009
David L. Littmann
Senior Economist
Michael D. LaFaive
Director of Fiscal Policy

MIDLAND - Mackinac Center Senior Economist David Littmann described as "false" the testimony delivered this morning to a House committee hearing in which Harvey Grace, chairman of Grace & Wild Studios, stated that Littmann supports the Michigan film incentive program and other incentives.

Grace's statement included the following:

" ... (The) senior economist at the Mackinac Center has been active in talking about the incentives, and in the packet that I've given to you I have an e-mail from him that he allowed me to use ... basically saying they believe in incentives. They're not against incentives. They're not against the film incentive. What they're against is targeting and picking and choosing favorites. So this is ... when you put it in the global spirit and scheme of things, no one is against incentives."

Later, Grace added, "even the people at the Mackinac Center are agreeing with what I'm saying."

Neither Littmann nor the Mackinac Center has ever supported the political definition of "incentives" that denotes politicians and government bureaucrats playing favorites in the market. As an economist, Littmann's career has been devoted to studying and explaining the role of market-based incentives, not the politically contrived ones that were the subject of this hearing.

"This was at best a distortion of my remarks," said Littmann. "I very clearly stated that incentives should be broad-based, including all factors of production and regions, and include no politically contrived favoritism. For example, the incentive I recommend is the elimination of the job-killing Michigan business tax and the related surcharge. This obviates the need for targeted film subsidies."

In the e-mail Grace cited, Littmann stated the following:

What's called for? We must now play leapfrog in the game of incentives to re-establish our business climate as a magnet. Well, that implies incentifying:

  1. All factors of production: land, labor, capital, entrepreneurship, venture [capital]

  2. All regions geographically (no pick and choose) (no political favoritism)

  3. All age groups

  4. All income categories

In short, INCENTIVES must be ethical, legitimate, durable, predictable, and ubiquitous ... market driven, not politically contrived as a political favor to some at the expense of others.

The two-hour hearing, conducted by the House Tax Policy Committee and the Committee on New Economy and Quality of Life, included speakers who were current and aspiring beneficiaries of the film subsidy program. No critics of the program spoke.

"The hearing was the legislative equivalent of the Theatre of the Absurd: A show piece designed to redirect and obscure, rather than to enlighten," said Michael D. LaFaive, director of the Mackinac Center's Morey Fiscal Policy Initiative. "Our list of studies and articles opposing political 'incentives' is so extensive that it would be inconceivable for a fair-minded, disinterested party to mistake our position on this issue."