Stars in their eyes, screws in our wallets: film tax credits
America is a country that has always been fascinated with rather than repelled by wealth, where people aspire to become rich, or at least associate themselves with the rich, rather than redistribute their wealth downward.
From page 7 of Congressional Testimony, given Tuesday July 21, 2009
And who more fascinating than movie stars? Unfortunately, Ohio voters aren’t alone is this boondoggle giveaway to the rich and fabulous, 39 other States, including ones who already have booming film industries- like California, give über rich asking for a handout.
Now, Ohio joins the crowd, with its “me-too” handout. Corporate welfare is alive and kicking- as is the redistribution of wealth in the name of “economic development.”
The film tax credit included in Ohio’s two-year state budget … Although Ohio is playing catch up — 39 other states already offer such credits — the measure makes Ohio more competitive as a movie location, said Vans Stevenson, a Columbus native and senior vice president, state legislative affairs for the Motion Picture Association of America.
“I think that it puts Ohio in the playing field,” Stevenson said.
The refundable credit is capped at $30 million over two years — $10 million the first year and $20 million in the second. It equals 35 percent of payroll expenditures for Ohio cast and crew wages and 25 percent for nonresident wage and nonwage expenditures. Up to $5 million is available per production.
Yet, when you look at this story: “Massachusetts loses big bucks on film tax breaks” from American Public Radio’s Marketplace you start to see the flip side of this one sided tax break.
Sure, it’s nice to think your city has “gone Hollywood” for a few weeks while a film is being made, complete with disruption to local businesses (have you ever seen what happens in Chicago or NYC when a film crew is “on location”)- but overall- how is this really benefiting the tax payer? Would your money be better invested in trash pickup in State parks (Ohio just trashed the pickup to save a measly $55,000 a year!) or by making it cheaper to pay the lackeys that the big stars require while suffering in the heartland?
At some point- taxes need to stop being used as tools- and just as ways to fund necessary public services, and last I checked- making movies wasn’t even close to necessary.
David, As a professional in the Loop (Chicago) and someone that is currently pursuing a move to your area I wanted to address this topic as I am fimailar with our situation in Illinois. It may not be apples to apples but I would hope that the tax credit plan Ohio has put in place is one that was thought out and has the resources to make it work for Ohio. Illinois at one time was an ideal film production destination and from a local standpoint, it was fun to see movie stars walking through town, big lights and camera rigs suspended over every imaginable location, and seeing our home state up on the big screen gives us a sense of civic pride. But more importantly, the driving reason to foster the industry was that the film business had a sizable impact on the Illinois economy and it did bring thousands of jobs to the state each year. In 2000, Illinois began suffering a mass exodus of the film industry as other states and Canada began enacting film incentives. By 2003, the Illinois film industry had fallen to an all-time low of $23 million in revenue. In response, the legislature passed the Illinois Film Tax Credit that incents production companies to choose Illinois for their filming needs. In December 2008 our current 30% Film tax Credit was signed into law and we expect 2009 to be among our strongest years yet. In 2007, Illinois brought in a record $155 million in revenue from projects attracted by our Film Tax Credit. These films provided thousands of job opportunities for everything from electricians, welders, construction workers, painters, truck drivers, accountants, hair and make up stylists, actors, extras, caterers, security personnel and all types of office workers. According to the University of Illinois, the film industry has strong employment and income multiplier impacts. In 2007, Illinois film industry activity supported more than 4,000 Full-Time Equivalent (FTE) jobs in Illinois – an 80% increase over 2006. The indirect economic benefits of the film industry are apparent in scores of related retail and service industries including hotels, restaurants, rental car… Read more »
I have to disagree with you, David. Film business is a lucrative, and many film professionals do live in our area. They will tell you that these incentives get money and jobs in the area, not to mention the enormous amount of publicity by having your city on the big screen. So much goes into a production the size of a film, and the support crew are valuable jobs for carpenters, electricians, teamsters, caterers, photographers, artists… Many of these jobs are the “creative professionals” we’re trying to attract! I’m not a big fan of tax money for private enterprise, but you gotta spend some to make some. Dayton will not sell itself if the past few decades are any proof; film is an excellent was to market the city/region.
Tim and Joe,
Thanks for your input. But, if this is so good- why not eliminate all taxes- Nationwide on everything related to making films?
By the same standpoint- why not eliminate all taxes paid to and by ad agencies- since we make things that make people buy things too-
and down the slippery slope we go.
We should ban ALL of these tax deals. Nationwide.
And- btw- I have a very good friend who has made 5 feature films for Fox, all from Dayton Ohio- but, often they film in Poland- where it is even cheaper.
So- stop with this tax break BS. Everyone has to pay their share.
“But, if this is so good- why not eliminate all taxes- Nationwide on everything related to making films?
By the same standpoint- why not eliminate all taxes paid to and by ad agencies- since we make things that make people buy things too-
and down the slippery slope we go.”
I think that’s something of a straw-man argument. Some taxes are recouped, but I think its more for the employment of the people working on the films. And once the word is out Dayton is film-friendly, more films come to the area. Many of the films incentives are speculation, but it’s hard to sit idle while Michigan’s incentives are drawing films in.
I would love to stop the tax breaks, but not everyone is going to do that. There will almost always be an undercut (i.e. NCR-Georgia) that creates incentive. The brutal nature of capitalism? That’s a tough question, and a near impossible culture to break. I admire your point of view. Corporate entitlement is maddening. How would you draw businessess, development, and tax revenue? Say, as a City Commissioner? :)
You draw business, development and tax revenue by doing the things government is supposed to do- exceedingly well, and you stay out of the things you do poorly- much like successful businesses do.
Unfortunately- just the process of getting an occupancy permit in Dayton is a painful process- as I once again was called this weekend by someone who is ready to give up on Dayton.
Without a level playing field nationally- we’re already hosed globally- the board is going to just get harder to saddle up to.
The moment government went in the business of buying jobs- instead of buying products and services to provide government- we all got hosed. This is just another one of the ploys of the desperate.
Thanks for your input. But, if this is so good- why not eliminate all taxes- (David Esrati)
Finally David, an idea we can agree on. They tell me that in the first five minutes of Econ 101 the prof tells the class a fundamental rule; business doesn’t pay taxes, their customers do. The Old Bandito did take Econ 101 while in college, but by minute three the entire class was in that glazed-eye, somunambalistic state near comatose that only an econ lecture can induce. But the old Prof was right; let’s be the first state to acknowledge economic reality, declare Ohio a tax-free zone for businesses old and new, then get out of the way while a stampede of new and existing companies find their way to our borders. Believe it or not, with their unemployment rate around 15 percent, the state of Michigan is pondering raising the state minimum wage. Our elected leaders are so out of touch with reality as to make them worthy of Rod Serling……………
Removing all taxes on all businesses because businesses don’t pay the taxes levied on them but rather their customers pay those taxes isn’t a bad idea.
However, if you get rid of all the taxes levied on businesses you might have to raise taxes levied directly on individuals or reduce government spending. (Yeah, yeah, one could argue, in a supply side kind of way, that the increased business brought to Ohio by all the companies flocked to our business-tax-free state would raise income and sales tax revenues, but quickly enough to make up the difference in whatever budget year the business taxes were repealed or to an extent large enough to make up the difference ever?)
That’s not reason by itself not to do away with taxes levied on businesses. It is reason enough, though, to ask questions about exactly how it would work. If increased business due to the change didn’t materialize quickly enough or to a great enough extent, what would you opt to do? Raise income tax? Raise sales tax? Budget cuts and if so what specifically?
35% of payroll means 65% of every movie dollar goes into our economy instead of Michigan’s. If the incentive provides a return on investment to the taxpayer, then the only loser is the state (or city) that has no incentive and cannot compete.
If industry-specific incentives were somehow declared illegal by Congress, then it would be a race to the bottom as states lower tax rates in direct competition, providing fewer services to citizens like you and me. We see it happening now as states slash their budgets to deal with the lagging economy.
Big business doesn’t care about streetlights and parks. NCR is a case in point. Small businesses need access to capital. Incentives and assistance programs help provide it.
Taxes and incentives go hand-in-hand. Always have, always will. Tax credits are just another form of an old game.
Ohio can’t afford to sit on the sidelines. As the saying goes, blame the game – not the player.
so, stop the game- nationwide.
Before this country is totally in the hole.
That’s not reason by itself not to do away with taxes levied on businesses. It is reason enough, though, to ask questions about exactly how it would work. If increased business due to the change didn’t materialize quickly enough or to a great enough extent, what would you opt to do? Raise income tax? Raise sales tax? Budget cuts and if so what specifically? (David Lauri)
Well, David, I think we call all agree that Americans enjoy prosperity not because of our tax structure, but in spite of it. As for the speed of industry moving to Ohio as the result of the no-tax proposal, the Old Bandito asks you to remember the recent past when the Ohio legislature, at the behest of Governor Tax, er, Taft, decided Buckeye businesses weren’t being taxed enough. Mead and NCR were among those who bolted the state so fast they left skid marks. One could reasonably expect business to come Ohio (realizing the competitive advantage of simultaneously lowering prices and enhancing revenue) at a even faster pace than the tax-inspired business exodus. Remember, every consumer item has a tax mark-up of around 25 percent, and the current rate of business taxation is not easily realized. When you buy a new car, for example, you are paying not only a crazy state tax, but the taxes of everybody from the assembly line to the receptionist at the dealership. Furthermore, consider the army of CPAs, auditors and book keepers business must utilize just to keep on the right side of the IRS. These folks do nothing for the bottom line, yet add significantly to the cost of business that is not measured in the tax rate. The incentive of a tax-free enviornment would be too large for employers to ignore. As far as raising individual taxes, which in Ohio are already too high, the influx of new capital would probably make such a move unnecessary. Besides, what benefit has high taxation brought us, other than unemployment benefits. Time to try something new………
Bandit, you ignored the main point of my post. I didn’t say, don’t do away with taxes levied on businesses. I said, what do you do if, after you’ve removed taxes levied on businesses, business doesn’t increase enough in Ohio to make up for the lost revenue.
A completely made up example. Let’s say that we have a state budget of $100 and that $50 of that comes from taxes levied on businesses and $50 of that comes from taxes levied directly on individuals.
You eliminate the taxes levied on businesses, so $50 of your revenue goes away. In the first year that you no longer have taxes levied on businesses, it’d be sheer foolishness, wouldn’t it, just to hope that the revenue from taxes levied directly on individuals would increase sufficiently and quickly enough to offset the loss of taxes on businesses.
So say that during that first year the revenue on taxes paid directly by individuals increases (because of additional businesses attracted to the business tax-free environment hiring new employees who pay income and sales taxes) by only $20. You have a shortfall of $30.
Do you increase taxes on individuals and if so, what would you raise (income tax or sales tax or both)? Sounds like you’re not in favor of increasing taxes. Fine, then your option is reducing the budget (by $30 in this made-up example). In real life Strickland and the legislature have just lost popularity for making tough choices. A politician who wants to eliminate taxes on businesses without raising taxes on individuals will probably have to be pretty stalwart when it comes to budget cuts, at least initially, don’t you think?