The state's Pure Michigan program subsidizes a tourism industry by running expensive advertisements out of state in order to lure tourists to Michigan.
Research shows the program is expensive and ineffective. It's also unfair and may be undermining attempts to control the COVID-19 pandemic. The program currently operates under a $15 million state appropriation, down from a pre-pandemic peak of $36 million. Officials should eliminate the program and redeploy the spending to higher priorities.
The idea behind this spending is to lure tourists and their money here to help the Michigan economy and create jobs. State officials have crowed that every dollar spent on out-of-state advertisements creates huge returns to the state treasury. No independent study confirms that it does. Quite the contrary.
In 2016, the Mackinac Center performed its own study of state tourism promotion, using publicly available data. We found that for every $1 million increase in state promotional spending, there was a corresponding revenue increase of just $20,000 for the entire accommodations industry, the best performing of the sectors in our study. In other words, the program is a huge net negative for our treasury. The parent company of the consultant the state hired offered us a rebuttal, but it was easy to refute.
The state's consultant has its own return-on-investment estimate for Pure Michigan, and its claims are credulity-straining. For 2019, the consultant reported, every dollar spent on advertising returned $8.79 in new tax revenue. But we have long questioned the consultant's reports. Among other issues, state consultants have excluded about 50 percent of the costs associated with the program, such as for creating the commercials. It's easy to show a positive ROI when you ignore costs.
In addition to being ineffective, the Pure Michigan program is expensive, with significant opportunity costs. Since 2006, the state has dedicated more than $381 million to it. Taxpayers would have gotten more bang for the buck by spending that on roads — it would have filled a lot of potholes.
Remarkably, the state budgeted $15 million to spend on Pure Michigan advertisements this fiscal year. In other words, during a pandemic, the state is buying advertisements to entice people to come here. The campaign began in December, after the state ordered the closure of indoor restaurant dining and waterparks and just after Gov. Gretchen Whitmer asked Michigan citizens not to travel for fear of spreading the novel coronavirus.
Finally, the program is also unfair: Many taxpayers with no direct tourism interest are forced to pay for it.
All of these examples make it clear that we should repeal the Pure Michigan program. It is ineffective, expensive and unfair.
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February 07, 2021 at 12:03PM
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Commentary: Pure Michigan program is expensive and ineffective - Crain's Detroit Business
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