Riding the film tax credit La-La Land train

Riding the film tax credit La-La Land train

As Pennsylvania legislators ponder a measure that would raise the dubious Film-Production Tax Credit by 80 percent, they should take notice of the latest in a long line of scholarly white papers that raise the dubiety of such credits’ real value to even higher levels.

As WESA radio recently framed the situation:

“The tax-credit program is meant to draw film and TV projects – from commercials to big-budget features – by offering credits equal to 25 percent of a production’s total budget. Productions that meet additional criteria can qualify for a credit of up to 30 percent.

“The state program is currently capped at $70 million per year. But Republican state Sen. Camera Bartolotta and some of her colleagues contend that’s too low. They say the program runs out of money within days of applications opening each year, and that productions that don’t receive the credits go shoot elsewhere, taking their spending with them.

“A bill Bartolotta introduced (in March) would increase the cap to $125 million a year, a jump of nearly 80 percent.”

With all due apologies to P.T. Barnum, a state government sucker is born every minute.

And just this month, public policy researchers Pat Garofalo and Michael LaFaive, of the American Liberties Project and Mackinac Center for Public Policy, respectively, teamed up for a Wall Street Journal commentary to, yet again, expose film tax credits for the corporate wealthfare and tax dollar waste they are.

“Call it the latest entry in the fantasy genre,” the researchers write. “As states look to bounce back from the economic damage of the coronavirus pandemic, many are considering new or expanded tax credits for movie production.

“The hope is that taxpayer subsidies will lure big-budget blockbusters and good-paying jobs, but such blatant corporate welfare has failed virtually everywhere it has been tried. It would be a comedy—if millions of dollars in taxpayer money weren’t on the line.”

Garofalo and LaFaive studied not just the film tax credit experience in their Michigan wheelhouse – no permanent jobs and a program, that when all the calculations are made, lost the state money – but review the nationwide experience:

“Nationwide, the evidence is clear,” they conclude: “State film incentive programs don’t create permanent jobs that benefit residents.”

But wait, there’s more:

“A 2018 survey of studies by Kennesaw State University economist J.C. Bradbury found that (film tax credits) return an average of only 27 cents per dollar invested.

“A study published in March by the Massachusetts Tax Expenditure Review Commission found the return on investment in the Bay State was 14 cents.

“In 2015 Maryland’s Department of Legislative Services reported to the General Assembly that film subsidies hurt the state’s economy, because the money could have been spent on things that actually create jobs and boost wages.

“In Kentucky, where subsidies were recently expanded, policy makers tried to avoid this pesky reality by releasing a taxpayer-funded study that ignored any evidence showing the subsidies’ failure.”

And in Pennsylvania?

A 2018 state Independent Fiscal Office (IFO) analysis found that the film tax credit generated a “return” of 13.1 cents for every tax credit dollar. IFO principal revenue analyst Stacey Knavel says the money could be better spent elsewhere. Think education and infrastructure.

And just to be clear, the “return” is not a percentage on top of the per-dollar investment. Put another way, for every dollar “invested” in the film tax credit scheme, a large majority percentage of the “investment” is lost.

Yet, despite the facts, supporters of expanding Pennsylvania’s film tax credit continue to talk in expansive terms of great and continuing financial returns.

Bartolotta leads the pack in an analysis that only can be described as bizarre:

“This is a way to get a huge return on investment without an initial investment by Pennsylvania,” she told WESA.

But, “It’s irresponsible to spend so much on a policy that has repeatedly fallen far short of its promises,” Garofalo and LaFaive conclude in their Wall Street Journal assessment. “Lawmakers … considering such corporate welfare should look at the evidence, then end their obsession with doling out taxpayer money to moviemakers.

“This sort of favoritism won’t create jobs or boost the economy, and anyone who claims otherwise is living in La-La Land.”

Sad to say that some Pennsylvania legislators still riding the La-La Land train can’t see the washed-out tracks ahead for the stars in their eyes.

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