Film tax credits no longer getting glowing reviews


By David ScharfenbergGLOBE STAFF

The Massachusetts film tax credit has created hundreds of jobs and helped finance a string of hit movies, from “Moneyball,” the true-life story of a data-driven baseball executive, to “Ted,” a raunchy comedy about a man and his teddy bear.

So Governor Charlie Baker raised some eyebrows a few weeks back when he proposed phasing out the program.

But the governor, it turns out, is no outlier. Around the country, a growing number of elected officials and independent analysts are souring on film incentives.

It has become too expensive, they say, to bring tinsel to town.

In Maryland, where the Netflix series “House of Cards” is shot, a recent report by the legislature’s nonpartisan staff found that for every dollar in film incentives the state doles out, it gets back only 10 cents in state and local tax revenue.

In Louisiana, known as “Hollywood South” for the size of its entertainment industry, a new study commissioned by the state’s economic development department says taxpayers lost as much as $184 million on film tax credits last year.

In the fall, Nevada shifted most of the money from its film incentives program into a package of tax breaks for electric carmaker Tesla. And Michigan and North Carolina have substantially scaled back their credits.

“They’re a colossal waste of money,” said Paul Stam, the Republican speaker pro tempore in North Carolina’s House of Representatives. “We were sending big checks to Hollywood producers and rich guys out of state.”

The trend is not universal. New York extended its program a couple years ago. California recently tripled its annual film and television tax credit program to $330 million in a bid to recapture business lost to other states.

And while a number of states are trimming back, 37 still have incentive programs on the books, according to the latest tally by Ease, a Los Angeles-based firm that provides the entertainment industry with payroll services and help navigating tax credits.

States subsidize up to 30 percent of production costs with tax credits. And Hollywood has taken to shopping around for the best deal. All the states combined spend about $1.5 billion per year on the bidding war.

Supporters say the investment is worth it.

Movies and television are good for tourism, they argue. Hundreds descend on Lake Lure, N.C., for the annual “Dirty Dancing” festival. And the Iowa ballfield from “Field of Dreams” is still a draw.

Film tax credits have also encouraged an entertainment infrastructure in some unlikely locales. Two years ago, the $40 million New England Studios opened on the former Fort Devens base west of Boston.

Productions also yield all manner of spin-off spending, with crews dropping thousands of dollars on hotels, caterers, and dry cleaners.

“If these programs were not working — not producing jobs, not producing investments — they would be eliminated,” said Vans Stevenson, senior vice president of state government affairs for the Motion Picture Association of America.

But critics say the work is temporary and the tourism impact difficult to measure. And there is little reason to believe local film industries will stand on their own any time soon, they argue: It is the incentives themselves, not the studios or talent they have spawned, that keep the stars coming.

“In reality, as soon as the state pares back the incentives, the industry leaves,” said Joe Henchman, a vice president at the right-leaning Tax Foundation and a prominent critic of film incentives.

“House of Cards” took a stick-then-carrot approach last year when Maryland lawmakers were considering reductions.

First the show threatened to leave. Then producers deployed actor Kevin Spacey to an Annapolis wine bar to woo legislators with handshakes, a punchy speech, and a drink called “The Frank,” named after his character Frank Underwood.

Governor Martin O’Malley, a Democrat, ultimately signed a package of tax breaks that kept the show in the state.

It is Republican governors and lawmakers who have been at the forefront of the push to roll back tax credits nationwide.

And conservative billionaire brothers Charles G. and David H. Koch have joined the fight of late — airing radio advertisements in North Carolina warning against “Hollywood handouts,” sending mailers to Florida voters, and dispatching a lobbyist to the Montana Legislature.

David Farber, a history professor at Temple University and author of “The Rise and Fall of Modern American Conservatism: A Short History,” said a generally liberal film industry makes for an attractive target for Republicans.

But he said the opposition to film tax credits is part of a broader strain of conservatism bent on dismantling a “crony capitalism” that favors some interests over others and replacing it with a “cleaner free market.”

In Michigan, Republican Governor Rick Snyder has labeled film incentives and other targeted tax credits the “heroin drip” of government.

But if conservative ideology has played a role, analysts say, the paring back of film incentives is largely driven by state budget woes and the sprouting of critical research from analysts on both the left and right.

“The ideological horseshoe effect is in play here,” said Robert Tannenwald, an economist who wrote a report critical of film tax credits for the left-leaning Center on Budget and Policy Priorities. “People who adhere to liberal or conservative fiscal priorities come together . . . [to oppose] subsidies that are focused on a narrow industry.”

Some Democrats have moved to restrain film tax credits. Former Massachusetts governor Deval Patrick tried unsuccessfully to cap the program. In Connecticut, Democratic lawmakers have scaled back incentives, incurring the ire of child star-turned-director Ron Howard, who called it a “horrible mistake.”

The scramble for film and television business began in earnest in 2002, when Louisiana ramped up its existing incentives program and New Mexico passed one of its own.

Over the next seven years, dozens of states followed suit — some of them quite creative. In West Virginia, officials offered a program called “River on Demand”: With a little help from the US Army Corps of Engineers, filmmakers could choose between “raging whitewater” and something more serene.

The Massachusetts incentives, put in place in 2006 and altered a year later, are more typical. The state covers 25 percent of production and salary costs, with some exceptions, and offers a sales tax reprieve on many purchases.

The program is widely credited with bringing a series of big-budget productions to the state — from “The Fighter” to “American Hustle.” But annual reports from the state’s Department of Revenue have cast doubt on the value of the breaks.

In 2012, the last year for which data are available, more than half of the money spent on production costs went to out-of-state firms, according to the department, and three-quarters of wages went to nonresidents.

The average state subsidy per Massachusetts job between 2006 and 2012: $118,873.

Baker has proposed using the money from phased-out incentives to double the state’s earned income tax credit, which benefits thousands of low-income working families. “For me, budgets and policies are about choices,” the governor said in a recent interview. “I view [the earned income tax credit] as a better choice.”

The pairing of the two policies has made the politics tricky for Democratic lawmakers who favor both. Some have called for separate consideration of the proposals. And they insist the film incentives are a success.

“It seems to me kind of crazy to take a credit that’s working and scuttle it,” said House majority leader Ronald Mariano, a Quincy Democrat.

Mariano and other supporters have criticized the Department of Revenue’s methodology and pointed to industry research that takes a more favorable view. A Motion Picture Association of America report from 2013 found that every dollar in credits awarded by the state led to $10 of spending in Massachusetts.

Film industry workers have sent hundreds of e-mails to lawmakers, some of them via savemafilmjobs.com, launched in recent weeks by set lighting technician Geoffrey Eads of Medford and his wife, a photographer who does not work in the industry.

The website is filled with the testimonials of local actors, set decorators, and food stylists trumpeting the economic benefits of film production and raising alarms about the governor’s proposal.

“Everyone is really apprehensive,” Eads said.

He puts himself in that camp, saying the uncertainty surrounding the film tax credit is scrambling his family’s plans. “We were going to move to a bigger house and a better school system,” Eads said. “But we don’t know if we’re going to do that now.”

http://www.bostonglobe.com/metro/2015/03/30/filmcredit/J1kTrxz48Ax70D22RziOVO/story.html

  1. No comments yet.
(will not be published)