Sure would be nice if the rest of the needed budget cutting was so easy to line out.

I wonder if there is a way to shift a large portion of public spending (even if it doesn't get reduced in the process) from one focus to another such as to reduce the need for future spending...

Anyone?

I have never been a fan of the incentive program, but have felt backed into a corner, watching my work going away, and I have been a supporter in protest.
I cannot help but hope that all of the state incentives disappear, then I will have work based on where the script demands, and also on my and my fellow Marylanders' and Virginia area member's talents.
Further, I feel that corporate subsidies all make a mockery of our tax system. how often have companies gotten term breaks to build a plant, at the end of wich they have gone and built a more modern plant at the next lowest bidder state?
Make hay where hay grows, smelt steel near mines, and if ethanol is a net waste of energy, let it fail.
If the Federal government wants to encourage industries, let them offer credits to the consumer, as the green rebates are doing now, or as they just did with the junker car rebates. and if the states want to encourage local businesses, let them offer a lower tax to the consumers in state for in state produced items on a case by case basis.

Iowa has more problems than tax incentives, they routinely allow film productions to not pay wages. That is not an industry problem but a legal problem.

Michigan has a holy city (detroit) and also a large workforce displaced by auto plant closings. They were looking for a way to help thousands of unemployed people find jobs, so they built a stage and offered incentives. Hollywood came and those workers and supply companies are more than happy about it.

Mass. has a small crew base and all members are employed before outside crew is hired. And please do not discount the lumber and steel companies whose employees are required and every other business that employs workers to shuffle product to movie productions.

It is a narrow minded view to think only of the 28% "footed by tax payers" and not the 72% that will never make it to the coffers. There is no reason to disregard an industry willing to spend millions of dollars because some findings say it doesn't work.

Maybe the next blog will contain information about New York and Pennsylvania and New Mexico

It's easy for Mr. Hancock to write these comments considering he doesn't work in the film industry. I've worked in the business for over 20 years. I'm currently working away from my Maryland home in Atlanta GA. Mr. Hancock doesn't have any regards for the people tax incentives really effect. The people working in the film business. A tax incentive program run correctly, is a win-win project. Thousands of people and businesses prosper from tax incentives. The state gets new generated income and only gives a percent back to the studios. If nothing is done about getting the work back through incentives. I will be forced to move to a state that has one.

This is absurd. Hundreds of hard working people are out of work because this bill hasn't passed. The local business, hotels, hardware stores, groceries etc. are out all of the revenue that could have been generated. Maryland once had a strong, vital film industry, now citizens of MD have to go to other states to make a living, taking their money, their skills, and their taxes with them. Focusing on the states where there have been problems doesn't make sense.... look at the states that have been successful. Having these incentives keeps Maryland in the lime light, with all of the money and prestige that comes with it. Not passing the incentive package ensures that we will lose any chance of regaining our former glory.

Wow, that was made to sound so cut and dry so I will attempt to do the same. If we are giving back 28% of there expenses arn't we getting 72%? If someone came to me and said you can have this $100 if you give me back $28 otherwise I will offer this to someone else, I think I will take $72 over $0. Also unless I am mistaken I believe the bill introdeced here was structured much different then the ones in Iowa, Michigan, Wisconson, and Mass., so Jay seems to be compairing apples to oranges.
Mike

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.

Jay,

I keep reading and re-reading your post bashing tax incentives for the film business. I also went back and re-read your last political commentary lambasting tax incentives when Barry Levinson came to town. For some reason I couldn't find any mention of the 10-year tax incentive your paper received from the city. Nor did I see you mention that Maryland is in the top 5 states for worst business taxes.

It's sweet to imagine a majority in congress that outlaws state-based economic development funds. The fact is, no such law would pass the 2/3 majority of states to ratify it.

Wonderful also would be a dream world where a congress that actually did something about the National Canadian film tax incentive (which I was told personally by two different CA congressmen is against NAFTA). Seems you didn't want to get into that important part of your half-informed opinion either.

There's much more to this issue than your post addresses. Looking forward to reading your next post about other industries unworthy of tax breaks....like the $33 million awarded to H&S Properties.

Bill Gray

Hi Bill: I don't blame the Sun or Brad Pitt or anybody else for taking legal tax incentives. I blame the politicians for being dumb enough to provide them.

Dear Jay,

Taxpayers don't actually pay money and there's no reimbursement in the traditional sense of the term. This is all about Tax Credits, where less tax is paid by the film producers. But the more important consideration is this: when a movie company rolls in, the crew, the actors, the company .. spend many thousands and even millions on hotel rooms, food, gas, clothing, fun stuff... it all leads to a net GAIN in economic terms. Why are you trying to turn away a chance for your state to get involved with something creative, where your fellow citizens will have a chance to create and enjoy new fun careers? Ohhhh, I hate overly-safe people who don't get it.
Sincerely, Gene L. Hamilton, SAG member

You know ... there is an upside to films coming to the Mid-Atlantic region many people get to work and our economy is stimulated... why should our young people have to leave for LA or NYC to experience this artform... and afterall palms are greased for many reasons in politics dont you think that the tax payers should be able to benefit from what you are suggesting is palm greasing? films add excitement to our cities and give them notariety why do you think LA and NYC are so interesting ... the chance to maybe meet someone that can jumpstart a career ... to many people go away and come back damaged why not give people a reason to stay here and practice there craft among the heavy hitters without having to leave home? why should people in film unions have to leave town and spend there hard earned dollars in another town. the big picture is when films are made here our taxpayers and store owners and public BENEFIT... lets make our cities more film friendly and ART FRIENDLY for that matter... what if your job were affected by a biased article... think through your articles before you write them you can avoid offending many hard working people... and to the public I SUGGEST YOU GET OUT AND VOTE ...when the time comes and get informed

It is with irony that I listen to the repeated cries that the State of Maryland is suffering from much reduced income. Work for those in the film and television industries in our State has all but disappeared over past months, and many are now struggling to survive. The state has lost a very large source of income that was normally paid into the tax base through our state and local payroll taxes alone. We no longer have disposable income to spend, a percentage of which would end up in State coffers. Whether we agree with the idea of incentives or not, the simple fact was that we believed that Maryland needed to compete for what is a very lucrative business for many, not just the folks who work in that field. Yes, many of us would prefer that incentives would go away, and the playing field leveled. However, that is not currently the case, and your selective condemnation solely of those incentives which would promote our livelihood is misleading to say the least. As mentioned several times above, your position would be more believable if it also addressed the use of taxpayer dollars to attract sports teams, politically-connected industries and various other ventures that manage to twist state and/or local governments into major tax breaks under the threat of "or we'll take our business elsewhere". All too often, the political jurisdictions take a financial beating from these sweetheart deals, and never enjoy the hoped-for financial result. Those of us working in the Maryland film industry have long made efforts to educate the public and our elected representatives about our work and how long it took to reach the favorable position we once held in the marketplace, and to develop an incentive plan that would be most beneficial to Maryland. Failing to act on an acceptable film incentive plan has driven away not just a piece of, but 100% of every potential dollar that our industry would have generated into state income, and it will likely take years for that industry to recover, if it ever actually can. In a climate where Maryland claims to be suffering from the loss of revenue, I am hard pressed to see the rationale of praising political actions that have driven a major income-producing business away from our State.

You should re-read the Massachusetts Dept of Revenue's July 2009 report. They actually pegged total local economic output from the film tax credit at $870 million dollars since 2006---and the cost to taxpayers at $140 million (net of new taxes collected). In other words, when all the credits are redeemed, the cost to taxpayers will be only 16 cents for every new dollar generated in the state's economy.

But the most interesting fact in the DOR report is this; During the first 3 years of the Massachusetts program, it has cost taxpayers exactly nothing. That's right. Zero. DOR reported that through FY2008, the state actually collected 3.6 million more in new taxes than was paid out in redeemed credits. Isn't that the way real "economic stimulus" should work?

Hi Nick: I don't know what report you read, but the Mass. Dept. of Revenue report I looked at found that the state spent $166 million in tax credits to increase state GDP by $510 -- and that's if you believe the dubious formula they used. I don't know where you got $870 million.

That's 33 cents out of taxpayers' pockets to generate a dollar of economic activity -- activity that doesn't come close to paying taxpayers back the 33 cents. You said: "DOR reported that through FY2008, the state actually collected 3.6 million more in new taxes than was paid out in redeemed credits." That's because most of the credits haven't been redeemed! Only $22 million off the $166 million in giveaways were cashed in by the end of 2008.

When they do get cashed they'll cut Mass. tax collections by a whopping $125-$130 million this year and $112-117 million next year, DOR said. That'll dwarf any new tax revenue the moviemakers generate. Here's my favorite part: Of the $429 million in filmmaking wages that qualified for the Mass. tax credits, $177 million went to out of state residents who made $1 million or more per picture.

Take a closer look. On page 17 of the Massachusetts report, the Dept. of Revenue put economic output generated by the film tax credit at $870 million in the first 3 years of the program. They also reported new direct spending at $676 million, and increased GDP (as you noted) at over a half billion dollars.

In short, no matter which measure of local economic impact you choose to believe, the benefit to the state's economy has been somewhere between a half billion and a billion dollars. Not bad. Curiously, you seem to be suggesting that DOR's estimate of new state taxes generated by filmmakers is completely reliable, while the very same agency's calculation of local economic impact is "dubious".

I'm afraid that is where you lose me. It is customary, when doing a cost/benefit analysis, to include figures describing the BENEFIT as well as the cost---especially if both measures are readily available in the same report.

The stubborn but undeniable fact is that the Massachusetts economy enjoyed an $870 million shot-in-the-arm, at no cost to the taxpayers through the end of the first three fiscal years of this program. And the ultimate cost to taxpayers (after all the credits are redeemed) is 16 cents for every new dollar of economic activity generated.

That's not my opinion. That's what the report says.

These tax credits were designed to bring new money into the private economy, not the state treasury. And by the yardstick of what they were actually intended to do, they have been a phenomenal success.

Nick, just imagine: film location choices based on the storyline balanced against local resources as opposed to payoffs and extortion schemes that have the several states cutting each others throat in a false competition.

Hi Nick: You're doing what defenders of corporate welfare always do: puffing up the alleged benefits and burying the bad news.

1) Ignore the $870 million "economic output" figure. Nobody accounts for economic activity this way, and even DOR says it's a "less useful" measure. Addition to state GDP is what to look at.

2) The costs of these deals are always simple to measure; the "benefits" are smoke and mirrors. To gauge the hurt to taxpayers, DOR simply looks at its books and adds up the credits applied for and cashed in. A 3rd-grader could do it. To measure benefits, they use the REMI model, well known for its imperfections and use as a "black box" to hype subsidies. REMI is a "simulation" -- DOR's term.

3) To repeat: Whatever economic activity the subsidies generated, much of it didn't help your state anyway. 82 percent of the wages -- again, easy to measure -- went to people who live somewhere else. Great program.