Economic consultant tells Michigan lawmakers incentives vary; urges care before reviving film credit

Patrick Anderson, president of the Anderson Economic Group, told a Michigan House subcommittee on March 19 that state tax incentives show "wide variation in the effectiveness of the programs" and urged lawmakers to carefully tailor incentives to support long‑lasting business activity.

Anderson said his firm's review, including a 2010 study of Michigan programs, identified some incentives that were effectively equivalent to a modest across‑the‑board tax rate cut and others that were poor investments. "We found some that were completely effective," he said. He singled out PA 198 as "still, very important" and said the state would have "great difficulty having industrial activity in Michigan without a PA 198." He contrasted that with what he called the "notorious film incentive," which he said became a "poster child for untrammeled waste of taxpayer money." "If you're not building long lasting economic activity in the state, you should not be spending tax incentive money on it," Anderson said.

Anderson described the methodology his group used in prior work: cataloging programs, identifying the relevant tax base, estimating behavioral responses and comparing each incentive to an alternative policy that reduced the general tax rate for the same eligible base. He said the full calculations are in the firm's report and appendices, which he said are available on the Anderson Economic Group website.

During questions, members asked how the firm measures effectiveness and whether incentive programs remain necessary given Michigan's economic changes since 2010. Anderson said the firm's methodology is summarized in the executive summary and appendices: "For every program we identified the tax base, including the non abated tax base and any abated tax base ... We estimated the behavioral parameters ... and then we did all the calculations for it, and they're actually in an appendix here." He added that states, including Michigan, have improved many programs since 2010 and that the subcommittee's work to reassess incentives is important.

On whether the state still needs incentive programs, Anderson said there is more consensus today that some programs are appropriate but warned that incentives "cannot be the cornerstone" of economic policy. "You have to have an economy and a reason for people to live and work here, and then incentive programs help you with that, but they don't replace that," he said. He also urged lawmakers to avoid reinstating the film credit, recounting his firm's field research and saying the program frequently resulted in money leaving the state.

Representative Dylan Wigela asked whether the 2010 conclusions still apply and how often states remove ineffective programs. Anderson said it is difficult politically to eliminate programs once established because they build constituencies, but noted Michigan has trimmed or reformed programs since the earlier report. He added that a handful of programs he cited in 2010 still worked in his view and that some other programs should be trimmed or replaced.

The presentation and Q&A emphasized measurement, transparency of assumptions and the need to compare incentives to alternative uses of taxpayer funds such as infrastructure. Anderson said his firm had warned for years that transportation funding and other public infrastructure require attention and that some investment alternatives (for example, roads and waterways) can provide clearer public returns than incentives that fail to create enduring local activity.

The hearing included lawmakers from both parties pressing for clearer evidence on how incentives perform and whether alternatives such as lower tax rates or public investments would yield better returns.