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Thursday, June 16, 2011

Giving Credits where Credits Are Due? Massachusetts’ Film Tax Incentive Program Respun

Best Place. Best Crews. Best Films., exults the Massachusetts Film Office , the state-run marketing outfit charged with enticing film makers to make movies and TV shows in the Bay State. In recent years, Massachusetts has hosted The Social Network, The Fighter, Shutter Island, soon to-be-released Moneyball, and other big-time productions.  Since 2007, the agency has set down cat nip for filmmakers via a tax credit equal to 25% of a film’s production and employment costs. In this, Massachusetts has company. Since Louisiana rolled out the practice in 2002, 15 states have jumped into incentiveville.

In talking up the tax credit program, it’s only natural for the Film Office to follow film songster Harold Arlen’s lead:  Accentuate the Positive. That it does by emphasizing the broadest-brush yardsticks like benefit to the economy (e.g, gross revenues) and jobs created in Massachusetts (also with grossed-up spin).

Drilling Down.  For relief, Wig & Pen turned to the Massachusetts Department of Revenue’s annual state-required reckoning, A Report on the Massachusetts Film Industry Tax Incentives. Released in January 2011, it covers calendar year 2009.  Here’s how the study parsed calendar year 2009’s $329.7 million in gross revenues from the Bay State’s film industry.
First, the report deducts $10.7 million in revenues that it estimates would have occurred without the tax credit program. Then, from the new total of $319 million it pares a whopping $215.2 million, reducing revenues to $103.8 million. The $215.2 million covers payments to film industry employees and businesses outside the state--$82 million of which went to $1 million and greater salaries for Hollywood actors.   

Finally, in step with the state’s requirement to balance its budget, the Department of Revenue subtracted state budget cuts needed to offset its film tax incentive expenditures.  That brought the direct economic impact of the program to $32.6 million.

In fairness to accentuators of positivity, the Department as part of the same exercise also modeled multiplier effects on the broader economy. That kicked in an additional $165.5 million in gross domestic product and personal income of $25.2 million.

Better, Not Best. So judging from Department of Revenue results, the tax incentive program was a force for economic good, but way less compelling than some might have us believe. Our lesson: even agreed-upon on gross economic indicators can mask as well as illuminate. It’s always a good idea to drill down, especially when special interests—inside and outside of government—have motive and opportunity.

Read The Economist's take (i.e., rant) on the use and abuse of film tax credits.

1 comment:

Peter C. said...

As resident of a cute little town which has often been used for large and small budget film locations I and probably most of my neighbors would testify that "It ain't worth it". Everything possible is imported including labor. One must endure a horde of self important boobs who are convinced that their production of yet another tired time waster for the public is possibly the most important thing happening on the planet. The best one was a very low budget sci-fi project of William Shatner, he and the entire crew ate daily in the local food co-op's deli.