Film tax credits: The pig’s new lipstick

Film tax credits: The pig’s new lipstick

The Pew Charitable Trusts is encouraged that Pennsylvania is taking steps that make numerous reforms to the accountability of state tax incentives. Among them, the commonwealth’s Film Production Tax Credit Program.

To wit, the state’s Independent Fiscal Office “encourages the state to develop a long-term vision for the program and consider whether the goal is to maintain or expand the existing industry. If the latter, policymakers crafting future legislation would need to consider whether Pennsylvania is willing to significantly increase its investment.”

Additionally, Pew reports, “Once the intended outcomes for a program are clear, lawmakers should ensure that policies are designed to meet those goals.  More precise targeting of the Film Production Tax Credit, for example, might prompt them to focus on long-term activities by establishing separate credits for television productions or for encouraging local hiring by increasing credit rates for resident labor.”

Furthermore, there supposedly are efforts underway to evaluate the programs to see if they do what supporters claim – long doubted by reasonable people.

That’s certainly welcome news – if you believe that taxpayers should underwrite a private industry. But the bottom line remains that the public has no business doing so.

Perhaps those still supporting film tax credits might consider an August 2017 review in the University of Akron’s “IdeaExchange” publication by Randle B. Pollard.

In his paper “Cut – and that’s a wrap – the film industry’s fleecing of state tax incentive programs,” he notes, recounting a wide body of  research, how industry employment often is overstated and how the bidding war that often results among states to secure productions results in no state winning because they pay more in subsidies than is necessary to attract those productions.

“Some critics claim the competition among states results in an economic war among competing states where no state is a ‘winner’ and there is a ‘zero-sum game,’” Pollard reminds.

Others skewer rightly suspect “multiplier effects” and have concluded film tax credits are a cost, not a benefit.

A Tax Foundation report called the competition for film production an “arms race of incentives.”

And, on a national level, “this competition does not produce a net economic gain because capital is simply relocating from one state to another,” Pollard noted.

Furthermore – and, again, all of this from Pollard’s review — jobs created by film production are typically temporary.  Once the film production has concluded the “jobs” end.

“In addition, many of the jobs created are not high paying” and “most of the skilled jobs go to out-of-state residents.”

And, Pollard concludes, sans standard nationwide metrics to determine efficacy, states will continue their “race to the bottom.”

That said, Pollard offers that “state tax incentives for the film industry will remain part of the economic development program of many states despite recent troubled programs and calls by public advocacy groups to rein in or eliminate such programs.

“The U.S. film industry continues to grow and there is opportunity for states with well-developed programs and rigorous compliance standards to be successful –providing net economic growth from the granting of tax incentives to retain or attract film production.”

But, again, that is if you believe tax dollars should be used as venture capital dollars. And, again, make no mistake — they should not be.

For as boston.com writer Sara Morrison reminded in a 2015 analysis of Massachusetts’ film tax credit program:

“Films are glamorous, and it’s nice to imagine that Boston could become Hollywood East. But if you’ve ever been on the Fox backlot, which simulates a New York street in the middle of Los Angeles, you know that behind the realistic building facades, it’s just scaffolding.

“It looks great, but it’s not real.”

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).