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Film Tax Incentives - Huge Costs for Temporary Jobs
The allure of Hollywood is almost irresistible. Everyone wants to see a movie star up close. Everyone dreams that they might someday be in the movies, if only as an extra. When the movies come to town, it somehow validates your community as a special place.
The movies have come to Massachusetts in a big way. Martin Scorsese and Leonardo DiCaprio were here recently. It seems that every week there is another story in the news about the success of the film production tax credits enacted by the Legislature in 2007. Hundreds of good high-paying jobs! Hollywood east! There is even serious talk about building one or more movie studios here.
What the fawning press fails to mention is the cost to you, the taxpayer. Movie producers are eligible for a 25% tax credit. Don’t confuse this with a tax break. Movie people don’t pay any sales tax – that’s one of the minor perks of doing business here. A tax credit is like an IOU from the taxpayers. For every dollar Disney or Fox spends, they get an IOU for twenty-five cents. When they spend $20 million on a big-name star, you shell out $5 million. That actor doesn't spend his money here; he takes it home to California. While he is here, the studios put him up in fancy hotels and the taxpayers pick up 25% of that tab too. The same deal applies to TV shows and commercials shot here.
Massachusetts is now considering another generous benefit to the Film industry. House Bill 4444, would force taxpayers to pick-up 20% of the cost of building Movie studios. The danger here is not so much the construction costs, but the ongoing costs. Once movie studios are built, the taxpayers will be committed to picking-up 25% of their operating costs, forever.
In order to better gage the revenue impacts of the film incentives, I asked the Massachusetts Department of Revenue (DOR) to provide an estimate of the tax revenue we can expect to earn from the film industry. The analysis was very thorough. It included spin-off jobs and economic multiplier benefits. The results were issued on May 19th, 2008. They show for every dollar we spend on film tax credits, we get back less than 18 cents. In other words, we loose over $.82 per dollar “invested”.
Just as outrageous is where the money is going. Much of it is going to people with salaries of over $1 million. We are subsidizing the income of wealthy movie stars and directors. This is not a business we should be in.
According to the DOR, $100 million in tax credits will create between 2,388 and 3,658 jobs. Each job will cost taxpayers between $22,443 and $34,380. However these are not full-time, permanent jobs. Workers hoping to make a living in the film industry must string together a series of temporary jobs as they move from project to project.
This represents not the cost to acquire these jobs, but the cost to maintain them for just one year. Once film tax credits are ended or substantially reduced, film production will shift to other states offering more generous benefits. The ten-year cost to maintain each job will be between $224,300 and $343,800.
Much of the work lured to Massachusetts has come at the expense of New York. That State has a well-established film industry, including movie studios and sound stages. In April, New York was forced to defend their film industry by more than tripling their tax credits, which now stand at 35% for productions occurring in NYC. If studios are built here we will be forced to do the same. In a very real sense, with film tax credits, we don’t create jobs we only rent them.
In March, the DOR estimated that Massachusetts is committed to issuing $90 million of film tax credits for just the first two months of this year. The film incentive program is just getting off the ground - the sky is the limit! Once movie studios are built and we truely become "Hollywood East", it won't take long for our revenue losses to exceed $1 Billion!
You can learn more by downloading any of the documents below:
DOR analysis of Film Studio Construction Subsidy Bill h4784
A Primer on the Massachusetts Film Tax Incentives
Latest DOR report on the costs of film tax credits, May 19, 2008
State of Louisiana: Film and Video Tax Incentives, Estimated Economic and Fiscal Impacts
Federal Reserve Bank of Boston Policy Brief: Hollywood East? Film Tax Credits in New England
- Steve
Committee to Elect Steve D'Amico
P.O. Box 83
Seekonk, MA 02771
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