Independent comments on the lucrative film tax welfare in the WSJ | TigerDroppings.com

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I B Freeman
Member since Oct 2009
5508 posts

Independent comments on the lucrative film tax welfare in the WSJ



"The Hollywood Tax Story They Won't Tell at the Oscars
It's easy to demand higher levies on the 'rich' when your own industry gets $1.5 billion in government handouts."

Written by Glenn Reynolds law professor at the University of Tennessee

LINK

quote:

At the Democratic National Convention last year, actress Eva Longoria called for higher taxes on America's rich. Her take: "The Eva Longoria who worked at Wendy's flipping burgers—she needed a tax break. But the Eva Longoria who works on movie sets does not."

Actually, nowadays an Eva Longoria who flipped burgers would probably qualify for the Earned Income Tax Credit and get a check from the government rather than pay taxes. It's the movie set where she works these days that may well be getting the tax break.

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DREAMWORKS/20TH CENTURY FOX / THE KOBAL COLLECTION
Daniel Day-Lewis as the 16th president in 'Lincoln.'

With campaign season over, you're not likely to hear stars bringing up taxes at this weekend's Academy Awards show. But the tax man ought to come out and take a bow anyway. Of the nine "Best Picture" nominees in 2012, for example, five were filmed on location in states where the production company received financial incentives, including "The Help" (in Mississippi) and "Moneyball" (in California). Virginia gave $3.5 million to this year's Oscar-nominated "Lincoln."

Such state incentives are widespread, and often substantial, but they don't do much to attract jobs. About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University's Adam Thierer has called this "a growing cronyism fiasco" and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002.

In its 2012 study "State Film Studies: Not Much Bang For Too Many Bucks," the Center on Budget and Policy Priorities found that film-related jobs tend to go to out-of-staters who jet in, then leave. "The revenue generated by economic activity induced by film subsidies," the study notes, "falls far short of the subsidies' direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies' positive economic impact."

Sometimes it is even worse, as demonstrated by Michigan's effort, begun under former Gov. Jennifer Granholm, to woo the motion picture industry with an expensive state-of-the-art studio facility built on the site of a former General Motors GM +2.26% factory in Pontiac. State leaders ballyhooed the plan as a way of moving from old-style industry to new.

Despite tens of millions of dollars in state investment, the promised 3,000-plus jobs didn't appear. As the Detroit Free Press reported last year, the studio employed only 15-20 people. That isn't boffo. That's a bust. The studio has defaulted on interest payments on state-issued bonds, and the guarantors—the state's already stressed pension funds—may wind up holding the bag. "In retrospect, it was a mistake," conceded Robert Kleine, the former state treasurer who signed off on the plans in 2010.

Michigan has drastically scaled back its subsidies under Gov. Rick Snyder, who said that he would rather spend the money on schools, police or the successful "Pure Michigan" ad campaign aimed at drawing tourists to the state.

Iowa ended its motion-picture subsidies in 2010, after officials misused $26 million in state money, leading to criminal charges. According to a 2008 investigation by Iowa Auditor David Vaudt, 80% of tax credits issued under the state's film-subsidy program had been issued improperly (to production companies that weren't even spending the money in Iowa, for example). The Council of State Governments reports that other states, from New Jersey to Alaska, are beginning to rethink their subsidies, too.

The $1.5 billion in subsidies that states provide, according to the Center on Budget and Policy Priorities, "would have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police patrol officers." Or it could have gone to cut taxes on small businesses, which, as Ms. Longoria noted in her DNC speech, produce two out of three jobs in the economy.

In her words: "It's the suburban dad who realizes his neighborhood needs a dry cleaner. It's the Latina nurse whose block needs a health clinic—and she knows she's the one to open it! It's the high school sophomore who is building Facebook's FB -0.56% competitor. They are the entrepreneurs driving the American economy."

And they are the people who aren't receiving the kind of special tax treatment that states dole out to Hollywood.





This post was edited on 2/23 at 10:20 pm



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I B Freeman
Member since Oct 2009
5508 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


Louisiana for uninformed readers gives out over $220 million of this welfare or about 15% of all that is given out nationwide if the $1.5 billion number is correct.







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davesdawgs
Georgia Fan
Georgia - Class of '75
Member since Oct 2008
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re: Independent comments on the lucrative film tax welfare in the WSJ


As you said, no one in Hollywood or the liberal media in general will be telling this story.





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LSUgusto
Member since May 2005
16361 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


How is a tax break a "give out"? Seems to me it's uncollected, rather than "given out" or "welfare". Are you sure you're using the right terms here?





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shutterspeed
Southern Miss Fan
Da Sipp
Member since May 2007
34414 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


I've spoken with a few LA filmmakers who are closely watching the state tax situation. If LA should decide to scale back or shutter film incentives, then Mississippi looks poised to pick up its business. Personally, I think LA would miss the business.





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LSUgusto
Member since May 2005
16361 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


One criticism is that crews "fly in and fly out", having a minimal economic impact. Heck, at least that's air traffic to our area that wouldn't be there otherwise. And, given the nature of air travel, I bet they occasionally have to buy an $11 cheeseburger or $4.50 cola when there's a delay or cancellation. That's real money!





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gizmoflak
Georgetown Fan
Member since May 2007
9004 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


$220 mil??

Holy hell, what a colossal waste






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shutterspeed
Southern Miss Fan
Da Sipp
Member since May 2007
34414 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


States offer a higher rebate for local hires. They can also cap the film budgets. Some of these states might be well served to modify their incentive programs as well as perform more effective audits of film budgets and the civil servants who draft and administer them. I think film incentives are a good idea in theory. I've seen the good they can do for underdeveloped areas. Film sets are like little towns that move into areas and prop up local economies.





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Asgard Device
The Daedalus
Member since Apr 2011
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re: Independent comments on the lucrative film tax welfare in the WSJ


quote:

How is a tax break a "give out"? Seems to me it's uncollected, rather than "given out" or "welfare"


They aren't tax breaks.

If you think tax credits are just tax forgiveness, then by all means give me $2 million in tax credits. That's $1.9m in my pocket and the tax payers didn't have to pay a dime. It's magic!






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LSUgusto
Member since May 2005
16361 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


I honestly did not realize that "tax credits" meant payouts. News to me.





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Asgard Device
The Daedalus
Member since Apr 2011
4246 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


quote:

I honestly did not realize that "tax credits" meant payouts. News to me.



Look, I'm not really for or against these subsidies, but they are payouts. Just not cash payouts.

Giving away gold bars wouldn't be cash payouts, either. Both are converted into cash when sold in the markets to 3rd parties. In this case, the state doesn't have to go out and buy anything, nor do they need to appropriate funding for it. (which may or may not be a good thing.)

The end result is essentially the same. For every dollar, the books would look something like this:

- 100 cent reduction in funds for the state (not counting economic impact).
+ 93 cents to the production company.
+ 4 cents in reduced tax liability for 3rd party buyer of credits.
+ 3 cents to the broker. (inefficiency/mis-allocation of resources generally occurs with a government-created marketplace)




This post was edited on 2/24 at 1:31 am


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shutterspeed
Southern Miss Fan
Da Sipp
Member since May 2007
34414 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


quote:

93 cents to the production company.


Help me to understand this.

I would've thought it 25-35 cents.






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I B Freeman
Member since Oct 2009
5508 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


quote:

93 cents to the production company.


Help me to understand this.

I would've thought it 25-35 cents.


They sell the tax credits to people with tax obligations. They are credits not deductions. They are guaranteed 85 cents on the dollar for the credits as the State will pay them cash money for that. They can however sell them to anybody as a result the credits are often sold for more than 85 cents.

They get 30-35% of their expenses rebated to them in tax credits. It is an out and out gift. No other economic incentive is anywhere close in terms of payout. They can pay an actor up to $1million and get $300,000 to $350,000 of the actor's salary from Louisiana taxpayers.

Solution--end them or at least make the credits non transferable so the companies will have to make their income Louisiana based too so they can use them. Presently they seem to use LLCs to get the welfare and then recognize the income from the films in another company in a more tax friendly state.



This post was edited on 2/25 at 9:07 am


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crawdaddy52
Vanderbilt Fan
Member since Dec 2010
852 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


Write your state legislator. If the deal is out there who wouldn't take it.





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doubleb
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Member since Aug 2006
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re: Independent comments on the lucrative film tax welfare in the WSJ


With the Super Bowl, the Saints, the Hornets, and all these movies and TV shows being filmed all in La. you'd think we'd be flush with cash, right? Add in the TIFs and all the other big tax breaks Jindal has doled out to get business in to La. and we should be booming, right?

But somehow despite all the business these subsidized enterprises are supposed to create, La. is struggling for revenues each and every year. The only time we time we really have extra cash is the years when we have bad hurricanes.

Methinks the public as a whole is beign snookered, and select groups prosper at the expense of the masses. Are we really igniting the economy with these deals?







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LSUgusto
Member since May 2005
16361 posts

re: Independent comments on the lucrative film tax welfare in the WSJ


Fair questions.





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