Web Feature | Economy

Film Tax Credits: Some States Reconsider

filmMoney.jpgFor a politician, showing up at a film set with, say, Morgan Freeman is more likely to get press coverage than going the opening of a chicken processing plant.

So, not surprisingly perhaps, the vast majority of states - and many local governments - now offer some sort of incentives to lure film-makers into shooting in their jurisdictions. They range from breaks on hotel room taxes, to generous income tax credits that can run into the tens of millions.

But some are questioning the value of such incentives, pointing to studies that indicate tax credits and other incentives for film companies do little to spur the local economy and may actually be hurting it.

ITEM: Struggling with a major budget deficit, the state of Wisconsin drastically scaled back its film tax credit this fall. The state had offered film companies a 25% tax credit, with no cap. That was replaced with a single, half million dollar grant designed to support a local film industry.

ITEM: Iowa had perhaps the most generous incentive of all the states - a 50% tax credit for qualified productions, which is advertised as "1/2 Price Filmmaking." But facing an almost one billion dollar revenue shortfall, lawmakers put a lid on the program, capping total credits awarded each year to no more than $50 million.

ITEM: Louisiana is another state with an aggressive incentive program, and critics have charged that it is subject to waste and corruption (a claim echoed by skeptics of film incentive programs in other states.) Last year, a producer, Malcolm Petal was sentenced to five years in federal prison after being convicted of bribing the head of the Louisiana film commission. The feds had been investigating the state's film office for years. Among the items of interest - a check for $27 million that the state wrote to repurchase tax credits earned by the producers of the film, The Curious Case of Benjamin Button.

ITEM: A Missouri think tank, called the Show-Me Institute, concludes that "film productions don't promote lasting job growth or bring in significant tax revenue. Many productions can cost more in state funding than they generate in temporary economic activity." Like other observers, the Show-Me Institute concludes that too many states are vying for film productions, and that newcomers such as Missouri simply should not try to compete with states that have established film workforces and infrastructures.

It's not clear how many states may eventually cut or eliminate their film incentives. But it seems clear that the combination of an economic downturn, and a record that often reveals little or no economic benefit will almost certainly curtail the stampede to offer movie companies incentives to shoot in almost every place imaginable.

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