From Wall Street Journal, Eric Felten

Snooki to Snookered: States' Film Tax Credits Produce Embarrassment


By ERIC FELTEN

New Jersey Gov. Chris Christie is threatening to revoke a $420,000 subsidy his state's Economic Development Authority is giving to MTV's "Jersey Shore" for filming there. Italian-American groups have been complaining, since the tax credits were announced last week, that New Jersey is subsidizing stereotypes. While the Newark, N.J.-based Star-Ledger newspaper acknowledged in an editorial that the reality show features "a bunch of 20-something nitwits," it didn't side with Gov. Christie. Instead, it said that his threat to veto the tax credit made him "the state's Censor-in-Chief."


Associated Press

The cast of MTV's reality show 'Jersey Shore.' Gov. Chris Christie is threatening to revoke the show's $420,000 state subsidy.

That's an accusation leveled every time officials rethink pumping money into dubious entertainments. Michigan, having written a check for a charming film about young cannibals gorging themselves on the flesh of the unsuspecting, last year balked at subsidizing the sequel. "This film is unlikely to promote tourism in Michigan or to present or reflect Michigan in a positive light," the state's film commissioner said. She was derided for prissy parochialism.

Texas governor (and now presidential hopeful) Rick Perry trumpeted his state's partnership with movie director Robert Rodriguez. That is, until he found himself asked to pay for a blood-drenched satire in which a machete-wielding Latino avenger gives the gringos some Tarantinian what-for. Texas decided last December—after "Machete" had already been released—not to hand over the hefty subsidy producers were expecting. "We would consider that censorship," sniffed someone from the film office in neighboring New Mexico.

One suspects the debate in Texas might have been different had the racial roles been reversed. What happens when the Ku Kluxers want tax credits to remake "Birth of a Nation"?

If governments fund movies, censorship is a given. Among the films ineligible for Florida incentives, for example, are "pornographic productions" and (perhaps in the same spirit) "political programs, political documentaries [and] political advertisements." But even the most casual perusal of the productions being funded by state governments finds a preponderance of low-budget gore fests, as if the tax credits were targeted to bolster the nation's fake-blood industry. Why are states so eager to underwrite reality television and schlocky horror picture shows?

Take Iowa. A start-up called Polynation Pictures came looking for backing for a sci-fi flick so lame it would have embarrassed Ed Wood. With a financing scheme worthy of Max Bialystock, the con these folks pulled was nearly as inept as the film they made, but Iowa's film office was too starry eyed to notice.

As prosecutors would later outline it, the filmmakers submitted millions of dollars in fake or inflated expenses and got the film office's head, Tom Wheeler, to reimburse half the phantom charges. Though such reimbursements are "tax credits," they are not mere relief from the tax burdens filmmakers bear. The credits are vouchers given out based on the producers' expenses, which can then be sold for cash to anyone with a tax liability. Many states underwrite as much as a quarter to 40% of the total budgets of films or TV shows they back. In Iowa, Mr. Wheeler was advertising he could offer "half-off film making."

The $767,250 production Polynation Pictures proposed eventually came in at $3.7 million. This was achieved in part with preposterous expenses. Producers claimed they paid $1,350 to rent six orange road cones. The use of two 6-foot ladders supposedly cost the company $900 (a bargain, as Polynation claimed to have spent another $900 to rent a single 8-foot ladder). Among production necessities was a new Mercedes. The partners set up an array of separate companies and used them to bill themselves extravagantly for work supposedly done on the picture. These were presented to Iowa as "deferred payments"—to be paid if the movie made money (which the enterprise was sure to do when Iowa handed the tax credits over). The only thing missing was a staged rendition of "Springtime for Hitler."

Several of the producers have already copped pleas. And two weeks ago a jury found Mr. Wheeler guilty on one count of facilitating the scam. The jury—which could have convicted him on eight other charges—seems to have concluded the former head of the film office was an idiot, not a crook. When Iowa finally audited the office last year, it found that some $25 million of the $32 million in film tax credits issued to various productions had been wrongly given out.

Hollywood accounting is a notoriously dark art. By trying to bankroll moviemaking, states put themselves in the position of being either saps or censors. How much better to promote industry, film or otherwise, simply by making it cheaper and easier for everyone to do business in a state.

As for "Jersey Shore," hasn't the state already contributed enough? This spring, Rutgers, the state university of New Jersey, paid $32,000 for Snooki to lecture its young scholars. "Study hard," she urged, "but party harder." And yes, be sure to get a government grant while you're at it.