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Film tax credits cost state too much, report says
Source:
nola.com
- Aug 9, 2012
By Jeff Adelson, The Times-Picayune
Baton Rouge -- The state's film tax credits cost the state about $60,000 for each direct job they create, according to a report from a think tank that blasts the program as an increasingly expensive subsidy without long-term benefits. The report, from the liberal Louisiana Budget Project, draws on previous state and third-party studies of the program to conclude that the credits amount to a perpetual subsidy that, because of the way the program is designed, guarantees it will take more money out of state coffers than it brings in. State officials defended the program as helping nurture a thriving industry and affiliated jobs and cited other studies showing that it does provide economic benefits.
Tim Mathis, author of the Louisiana Budget Project report, said that money could be better used shoring up the funding for state priorities.
"We're not trying to eliminate the industry here, but the industry needs to stand on its own without public support," said Mathis, an analyst with LBP. "It'll be a way for Louisiana to reinvest in education and health care and other areas that have really suffered over the past four years from consecutive budget cuts."
The Motion Picture Industry Development tax credit has been around since 2002 but did not see widespread use until it was expanded a decade later. The program now offers films that spend more than $300,000 in Louisiana a tax credit equal to 30 percent of the money they spend in the state and an additional 5 percent credit on payrolls to Louisiana residents.
Since 2002, more than $1 billion in tax credits have been issued. The program reached its high-water mark this year, with the Department of Economic Development distributing $231 million in credits, a 29 percent increase over last year. According to the Bureau of Labor statistics included in the report, about 2,510 people in Louisiana worked in film production last year.
Secretary of Economic Development Stephen Moret touted the increase as a result of the credits attracting new productions to the state.
"The film production tax credit program was designed to cultivate and sustain a thriving film production industry in Louisiana -- and it's been very successful," Moret said in a statement responding to the report. "Louisiana is now No. 3 in the country in film production activity, and the industry supports thousands of jobs in Louisiana that previously did not exist. In fact, third-party economists have estimated the economic impact of film tax credits in Louisiana to be nearly six times the fiscal cost of the tax credits."
But the Louisiana Budget Project disputes that impact. The report, citing statistics from 2010, notes that the 118 productions that received the credit in 2010 cost the state about $7.30 for every $1 of new tax revenue it brought in. And while the Department of Economic Development's statistics include other economic impacts, such as money spent on goods in the state, the report asserts that those impacts are exaggerated. For example, much of the money spent at businesses is for products produced outside of the state, which means the economic impact is not confined just to Louisiana, the report says.
Acknowledging the popularity of the tax credit among officials and the broader community, the report stops short of recommending the program be eliminated. Instead, it calls for gradually making the credits less generous and placing a cap on the amount of money that the state will provide in credits, potentially allowing companies to roll over earned credits into the next year. In addition, the report recommends eliminating the transferability of the credits to eliminate the inefficiencies inherent in the brokerage system.
"If subsidies do not lead to a self-sustaining industry, able to compete and provide permanent jobs without government help, then the state needs to invest elsewhere," according to the report. "By this more appropriate standard, Louisiana's film tax credit program has failed. Rather than creating permanent, good-paying jobs, Louisiana's program simply 'rents' jobs, many of which would disappear without the subsidy."
Moret said the program does not just promote transient film making but also creates permanent businesses.
"Additionally, the film industry has generated billions of dollars of new economic activity in Louisiana, and its presence here has helped us attract other permanent, entertainment-industry projects, such as Pixomondo, EA Sports, Pixel Magic and Gameloft," Moret said.
Category: General Business
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