Lee Thomas Article ..Dreaded Tax Credits

This article is taken from another person's blog: Moderated by Rick Badie A popular film industry tax credit has led some to call Georgia the Hollywood of the South. The director of the state film office calls the tax incentive a necessity in a competitive market. A tax analyst suggests it’s time for all states to roll up the red carpet and end subsidies for such a profitable industry. Tax incentives fuel filmmakers’ interest By Lee Thomas Last week, the Georgia Department of Economic Development released the state film office’s fiscal year 2012 economic impact numbers for the film industry — $3.1 billion. The state is currently hosting 32 film and television shows, from home improvement shows to scripted dramas and major feature films. In February 2007, we had one project filming here: the MTV reality show, “Yo Momma.” The economic impact for that fiscal year was $244 million. How did the state’s film and television industry grow over 1,100 percent in five years? First, by having a proactive legislature and governor who supported the Georgia Entertainment Industry Investment Act, a tax credit incentive of up to 30 percent for projects. Canada started offering incentives for entertainment projects in the late 1990s. Louisiana started the first competitive domestic incentives in 2002. We lost business to both of them. In 2005, when a biopic of Georgia’s native son, Ray Charles, was filmed in Louisiana, legislators decided enough was enough. Today, a market must offer incentives. Studios’ accounting departments dictate which states can be considered for projects. The tax incentive savings are typically rolled back into the budget, raising the spending level. The influx of cash into the economy is widespread. Georgia’s real estate market has been buoyed by shows that rent warehouses, offices, homes and apartments. The film business supports hotels, restaurants, rental car facilities and so on. More than 60 new businesses have expanded or located in Georgia since 2007, from major sound stages to production support companies. These companies are here because the level of business warrants it. They do not get the film tax credits. The film and television industry has provided tens of thousands of jobs to Georgians, not only in technical positions, but also as caterers, production assistants, painters, hair dressers, etc. A 2011 study indicated that for every dollar the state spends on tax credits, $1.24 is earned in state and local taxes. This does not take into account the value of having Jennifer Aniston talk about how she loves Clarkesville on “Good Morning America,” or the Georgia logo being on the credit roll of a film like “The Blind Side.” It does not represent tourists who travel to Georgia to see the Mystic Grill in Covington from “Vampire Diaries.” Senoia, which hosts AMC’s hit “The Walking Dead,” has seen businesses downtown increase from six in 2006 to 47 by 2012, largely due to the film industry. Georgia is uniquely situated for the film business. We have an experienced workforce and infrastructure to save the production companies money. We have a temperate climate so productions can film year-round. We have a diverse topography of mountains, beaches, plains, small towns and urban landscapes. We have great restaurants and the ease of access provided by the world’s busiest airport. Georgia does not have the highest incentive, but it is sustainable. All of these assets help make filming in Georgia cheaper, easier and more desirable than in most markets. The film industry in Georgia means business! Lee Thomas is director of the Georgia Film, Music and Digital Entertainment Office. Better uses for scarce dollars By Joseph Henchman This November, the Georgia State Archives reduces itself to three staffers due to budget cuts, making Georgia the only state without archives open to the public. Other state agencies have been asked to cut themselves 3 percent, the fifth consecutive year of budget and staff reductions. One program not seeing cuts is the state’s annual $200 million in film tax incentives. In recent years, more than $500 million in Georgians’ taxpayer dollars has been funneled to film and television production. Your tax dollars now pick up as much as 30 percent of qualified production costs of one of America’s most profitable and successful industries. Georgians see some benefits, it is true. The state has seen more productions. A couple thousand Georgians work in entertainment, producing everything from Tyler Perry’s hit movies to the poorly reviewed “Mean Girls 2.” But research by scholars on the left and right has found that most jobs “created” by movie productions are often temporary with limited upward mobility, the kinds of jobs that end when shooting wraps and the production company leaves. Film tax credits will never create an independent industry. Hollywood folks are clear that if the tax spigot is ever turned off, they’re gone. This isn’t a case of the state providing a bit of seed funding to a new industry. It’s subsidizing Hollywood productions for a few weeks’ work. Studio lobbyists are eager to ask for money, but promise no loyalty in return. When Georgia’s tax review commission looked at the credit last year, it recommended elimination. In response, those who benefit from the subsidies argued the credit doesn’t actually lose money since it is refunding tax that wouldn’t have been paid otherwise. I don’t buy that. Georgia had film productions even before the credit, but its credit is actually “transferable.” That means that if a Hollywood company gets a bigger tax refund than it owes, it can sell its unused tax credits to Georgians with big tax bills. That means the state is losing money it would have otherwise collected. Other states are realizing that there are better uses for scarce state tax dollars than expensive and ineffective film tax incentives. By our count, state subsidies for the film industry nationwide have dropped from their all-time record of $1.5 billion in 2010. Many states are at last evaluating the programs, especially after a major embezzlement scandal in Iowa sent film officials and producers to jail. Some states, like California and New York, are giving even more tax subsidies. California is now spending $100 million a year in film tax subsidies, and New York spends an astonishing $400 million a year. Topping them means essentially handing out money. Perhaps a better approach is rolling out the red carpet for everyone, not just the film industry. Instead of high taxes for everyone and low taxes for a few, why not even it out so everyone pays a little less? Small Georgia-grown film productions would benefit, as would loyal Georgia businesses that create jobs year after year. As for Hollywood films, Georgians could make some popcorn and enjoy movies that citizens in other states are subsidizing with their tax dollars. Joseph Henchman is vice president of legal and state projects for the Tax Foundation.