States cut taxpayer movie-production giveaways
In this year's General Assembly session, Del. Melony Ghee Griffith introduced a bill that would have required you, me and other Maryland taxpayers to reimburse film producers for 28 percent of their expenses incurred in Maryland. This sort of giveaway had gotten very fashionable as state politicians in dozens of states bid higher and higher to bribe producers to change shooting locations.
Michigan's taxpayers were footing 40 percent of production costs. Iowa's, 50 percent. The people who made The Curious Case of Benjamin Button swiped $27 million from the taxpayers of Louisiana. You can bet the added economic activity from that movie generated nowhere near that much in marginal tax revenue for the state. All these deals are losers for taxpayers. Fortunately the Griffith bill didn't go anywhere.
Now, reports Phil Mattera of Good Jobs First, states are realizing how stupid movie incentives are and are reducing or eliminating them:
... With states suffering runaway costs, mediocre benefits and recurring abuses, the great film tax-incentive gold rush is losing steam. Various states are eliminating, cutting back or at least debating their film subsidies. In one state, Iowa, evidence of mismanagement in the tax credit program has created a political uproar and prompted a criminal investigation.
In Iowa, says Mattera:
the state’s economic development director resigned, the head of the state film office was fired, and the tax-credit program was suspended.
a state budget analyst told the state Senate Finance Committee that the incentives would never pay for themselves. Recently, Gov. Jennifer Granholm proposed scaling back the credit to help fill the state’s budget gap.
the state Department of Commerce issued a report arguing that the credits provided little net economic benefit for the state.
the state Department of Revenue released a report finding that only 16 percent of the wages paid by subsidized film productions went to Massachusetts residents.
UPDATE: In response to comments:
I will try to make this clear. Programs that give taxpayer money to filmmakers are not win-win. They are win-lose. Please do not confuse economic activity generated by filmmakers with taxpayer revenue generated by filmmakers. Steven Spielberg makes a new Indiana Jones movie in which Indy tries to find the fabled Lost Maryland Republican. They spent $100 million in the state.
So Comptroller Peter Franchot has to issue tax credits of $28 million, which Spielberg can resell to Black & Decker, T. Rowe Price and others with Maryland tax liability. Taxpayers have just spent $28 million. In return, let's make an assumption that ALL the $100 million spent on the film accrued to Maryland businesses and residents. (As you can see from the Massachusetts experience, this is absurd. In that state only 16 percent of the spending from subsidized films went to residents.)
To obtain a return for the state comptroller, we tax that activity. The corporate income-tax in Maryland is 8.25 percent. The top personal rate is around 9 percent if we include the piggyback. Some sales tax (6 percent) will be generated. Just to be ultra-generous, let's inflate the total assumed return to the state treasury to 15 percent -- $15 million. That's still a $13 million loss to taxpayers. Moviemakers: Win. Taxpayers: Lose.
David Noble: Amen to you. Congress needs to step in an outlaw all state-based economic development welfare.