Pure and simple: film and tax incentives create jobs, expand revenue pools and stimulate local economies. That’s why a study released by the Tax Foundation yesterday strained credulity and provided a host of prejudged conclusions about the value of film and television tax credits in bolstering jobs and local economic development.
With no real understanding of film and television financing, nor the incentives it argues against, this out-of-touch think tank was simply driving its own tax policy agenda and produced a report to back up its positions, peddling it as unbiased research.
I think we all would agree that during this recession, keeping middle-class jobs in the U.S. and generating local economic development is crucial, and that is exactly what these tax credits do in states all across our nation.
At the end of the day, this is a report produced by an organization that makes its opposition to tax incentives clear in its own mission statement, and unfortunately, the political slant of the foundation seems to have dictated the outcome of its research.
The film and television industry contributes in a very real way to the economies of all 50 states and the District of Columbia through on-location production and infrastructure development. More than 115,000 businesses – 81 percent of which employ fewer than 10 people - and over 2.4 million American workers depend on the film and television industry for their jobs. The industry generates roughly $13 billion in state taxes and $40 billion in payments to vendors, suppliers and others nationwide.
These jobs provide an immediate opportunity to expand local employment during a difficult economy and the state has the benefit of current time value of money: employ now- pay later. The time value of money makes these incentives extremely valuable to the states where production incentives are utilized.
Even as many states are facing budget deficits, new and expanded production tax credits continue to emerge because they have proven effective in reinvigorating state economies by providing rapid relief to local businesses and replenishing shrinking state revenue pools.
States that recently created or expanded film and television production tax incentives:
- In Florida, the state recently increased by $12 million, their $242 million transferable film and digital media tax credit program established in 2010.
- New York’s production incentive program enacted last year was sustained, and that includes $2.1 billion in funding to the New York production tax credit for five years.
- Connecticut adjusted their 30% film and digital media tax credit this year keeping the centerpiece of the incentive, and retaining the competitiveness of the program, which will continue to make the state an attractive production location.
- North Carolina bolstered their film tax credit (which is uncapped) and created a new digital media tax credit program as well.
- Mississippi increased their incentive.
- Maryland created a new film production activity credit this year.
- Utah’s program was expanded.
- Virginia has a new film tax credit.
States that have recently overcome adverse legislative initiatives to reduce or eliminate production incentive programs:
- New Mexico
- North Carolina
- South Carolina
The states that have terminated their production incentives were not competitive. Kansas’ suspended film incentive program only applied to in-state companies and was not designed to attract out-of-state filmmakers.
Iowa’s film credit program was suspended due to corruption and inadequate program oversight. Iowa is looking to revive the production tax credit program and the Governor has been supportive of a vibrant film production tax credit program in Wisconsin.
There were several proposed legislative eliminations and cut backs of state film production tax credit programs in 2010, which were all defeated. These include initiatives in Massachusetts, Michigan, New Mexico, Pennsylvania, Rhode Island and South Carolina.
Two recent studies that performed cost/benefit analyses confirmed the economic benefits of production tax incentives to New York and Michigan. Michigan’s report, sponsored by the Detroit, Ann Arbor, Traverse City and Grand Rapids Convention & Visitors Bureaus indicated that the incentive created nearly 4,000 full-time equivalent jobs for Michigan residents in 2010 at an average salary of $53,700 per year, and generated roughly $6 per dollar of net credit cost. The New York report showed a 1.9 return on the state’s investment (ROI).
In locations with uninterrupted film tax credit programs there have been continuing investment and job growth. In Massachusetts, for example, only 10 films were produced over seven years with $67 million of direct investment. Once the credit was enacted the Commonwealth had 26 films in three years with a startling $676 million of direct investment to the state.
The film and television incentive programs can do wonders and are a robust economic stimulus. In the short term, it generates substantial tax revenues with credit claims paid 18 to 24 months after production has wrapped. New investment in film and digital media production is, on balance, revenue positive.