7
Mass. loses big bucks on film tax breaks
A film being shot on location.
To view this content, Javascript must be enabled and Adobe Flash Player must be installed.
TEXT OF STORY
Kai Ryssdal: The monster success of the new "Transformers" movie aside, the summer hasn't been a blockbuster in terms of overall ticket sales. Hollywood isn't the only party that wants a slice of a movie's success. States offer huge tax incentives to film companies hoping the productions will bring money into the local economy. But a report from the state of Massachusetts shows that it doesn't always work out that way. Marketplace's Rico Gagliano reports.
RICO GAGLIANO: Massachusetts has been buzzing about a recent report from their Department of Revenue. The report says the state didn't actually earn money from the film productions that shot there last year. In fact, thanks to tax credits which Massachusetts gives to movie productions, it lost quite a bit. Steve D'Amico is a state representative.
STEVE D'AMICO: Report basically says that our net loss was $95.5 million.
This in the midst of a budget crisis. And D'Amico says Massachusetts hasn't gained $95.5 million bucks worth of local film industry jobs. He thinks the 43 states which offer tax credits to filmmakers should get out of the movie-wooing business.
D'AMICO: This is a massive waste of money. I mean, the problem is that this is a 43-state competition. There are 43 states, they go from state to state peddling this stuff, bidding states off against each other. So this is a race to the bottom we simply can't win.
Another state in that competition? California, where a nonprofit called Film L.A. wants its state government to offer more credits and incentives to film productions. Paul Audley's the president. He says despite the report Massachusetts has reaped some benefits from film production.
PAUL AUDLEY: Seventy-seven million [dollars] in wages were paid to Massachusetts people, and well over that -- $343 million dollars -- in GDP increases in Massachusetts over the same period.
Even so, Massachusetts representative D'Amico will offer a bill later this year to roll back the tax credits. Some senators in Pennsylvania hope to do the same thing with their state's credits, too.
In Los Angeles, I'm Rico Gagliano for Marketplace.
As President Obama is proposing a tax break for businesses to hire the unemployed, so Governor Patrick should propose keeping the tax breaks for the film industry intact. Doing so creates jobs.
Rich Californians come to Massachusetts and spend their money to make movies; high paying jobs are the result. Every dollar the state takes from business through taxation is one less dollar business can spend for the labor it needs to make movies.
The Office of Economic Development in Massachusetts issued a report analyzing the 1 billion dollars in economic activity the Commonwealth experienced because of what the film industry did here in the last few years. Hollywood spending in Massachusetts means the Commonwealth sees a net increase in tax revenue, especially with its new sales tax of 6.25%. if a crew spends $100 million dollars of their own money making a movie, they give Massachusetts 6.25 million dollars in sales tax alone for the honor of filming here, and create thousands of high paying jobs for unemployed Massachusetts residents.
The Massachusetts Department of Revenue's report is correct regarding state revenue, but omits the heavy stimulus that Californians, spending their own money, has upon the Commonwealth -- the Commonwealth does not get as much money as it wants; instead, the money goes directly to the businesses and workers who service the film industry, without forking it over to the Massachusetts Middlemen through taxation.
The concept of FTE, or full time equivalent jobs, does not apply as all the jobs are part time, and highly compensated. No one making films, even Ben Affleck or Matt Damon, ever works full time in the film industry. Other states that have film tax breaks do not have the advantages that Massachusetts does -- Hollywood wants to be here because of the scenic diversity, and highly skilled, but unemployed worker base. Last year during filming, Massachusetts was downtown Manhattan, Paris and Rome, and the Alaskan coastline. No state can match that diversity, no matter what their tax break rate. No state outside California and New York can match the talent and crew resources right here. And Hollywood wants to be here -- we have the infrastructure, and we have the locations. We just need the political resolve for the Commonwealth to leave filmmakers alone to spend their own money as they see fit, without the Commonwealth taking more of it.
Although the state may lose some of its tax revenue for its social programs, businesses will thrive, and pay more taxes to the Commonwealth as a result anyway. Film is a growth industry -- and the only one that will employ thousands in the upcoming years. If the studios ever get built, the industry will be permanently established here, and the large talent and crew pool will continue to increase, guaranteeing Massachusetts residents employment year after year.
The tax breaks do not go as far as I'd like. Governor Patrick should propose removing all taxes on all businesses if he really wanted to help the "Common" wealth and create jobs. How many new jobs could all businesses create if they didn't have to pay the state first? The President thinks it's a good idea; why not the Governor?
As President Obama is proposing a tax break for businesses to hire the unemployed, so Governor Patrick should propose keeping the tax breaks for the film industry intact. Doing so creates jobs.
Rich Californians come to Massachusetts and spend their money to make movies; high paying jobs are the result. Every dollar the state takes from business through taxation is one less dollar business can spend for the labor it needs to make movies.
The Office of Economic Development in Massachusetts issued a report analyzing the 1 billion dollars in economic activity the Commonwealth experienced because of what the film industry did here in the last few years. Hollywood spending in Massachusetts means the Commonwealth sees a net increase in tax revenue, especially with its new sales tax of 6.25%. if a crew spends $100 million dollars of their own money making a movie, they give Massachusetts 6.25 million dollars in sales tax alone for the honor of filming here, and create thousands of high paying jobs for unemployed Massachusetts residents.
The Massachusetts Department of Revenue's report is correct regarding state revenue, but omits the heavy stimulus that Californians, spending their own money, has upon the Commonwealth -- the Commonwealth does not get as much money as it wants; instead, the money goes directly to the businesses and workers who service the film industry, without forking it over to the Massachusetts Middlemen through taxation.
The concept of FTE, or full time equivalent jobs, does not apply as all the jobs are part time, and highly compensated. No one making films, even Ben Affleck or Matt Damon, ever works full time in the film industry. Other states that have film tax breaks do not have the advantages that Massachusetts does -- Hollywood wants to be here because of the scenic diversity, and highly skilled, but unemployed worker base. Last year during filming, Massachusetts was downtown Manhattan, Paris and Rome, and the Alaskan coastline. No state can match that diversity, no matter what their tax break rate. No state outside California and New York can match the talent and crew resources right here. And Hollywood wants to be here -- we have the infrastructure, and we have the locations. We just need the political resolve for the Commonwealth to leave filmmakers alone to spend their own money as they see fit, without the Commonwealth taking more of it.
Although the state may lose some of its tax revenue for its social programs, businesses will thrive, and pay more taxes to the Commonwealth as a result anyway. Film is a growth industry -- and the only one that will employ thousands in the upcoming years. If the studios ever get built, the industry will be permanently established here, and the large talent and crew pool will continue to increase, guaranteeing Massachusetts residents employment year after year.
The tax breaks do not go as far as I'd like. Governor Patrick should propose removing all taxes on all businesses if he really wanted to help the "Common" wealth and create jobs. How many new jobs could all businesses create if they didn't have to pay the state first? The President thinks it's a good idea; why not the Governor?
Both Mr. Gagliano and Rep. D'Amico are mistaken about the film tax credit in Massachusetts. The Dept of Revenue, in their July 2009 report, pegged total economic output from the credit at $870 million dollars. And the cost to taxpayers at $140 million (net of new taxes collected). In other words, once all the credits are redeemed, it will cost taxpayers 16 cents for every new dollar generated in our economy. But the most interesting fact in the DOR report is that during the first 3 years of the program, it has cost taxpayers exactly nothing. That's right. Zero. DOR reports that through FY2008, we actually collected 3.6 million more in new taxes than we paid out in redeemed credits. Isn't that the way real "economic stimulus" is supposed to work?
Nick Paleologos
Executive Director
Mass Film Office
Not only is Massachusetts losing money on its "bribes" to the motion picture industry, it is probably violating the constitution. What is the difference between paying an incentive for Massachusetts goods and services and charging a tariff for goods and services purchased from out of state? Nothing in my mind, yet tariffs clearly are prohibited.
Also, if these incentives are such a great idea, how does Massachusetts (or any other state paying them) justify not paying such incentives to other businesses? Indeed, how do they justify charging these business the taxes it then pays out in rebates?
Put simply, the states that give Hollywood rebates are being ripped off by the major studios. Just look at the empty sound stages in North Carolina if you don't think this is true.
From the Dept. of Revenue itself:
DOR reported that during the first 3 years of the program, the state actually collected $5.5 million more in taxes than it paid out in credits. DOR figures show that new direct spending on film and television production generated by the FTC has exceeded $675 hundred million dollars since its inception in 2006. Since 2006, 62% of all new direct and indirect jobs created went to Massachusetts residents.
Since 2006, direct employment of Massachusetts residents in film production increased by 537%.
The median annualized wage for Massachusetts residents employed by film productions was $67,775.
This is a long-term investment to establish the infrastructure to support a huge private-sector industry in our state.
What part of tax revenue down $98.4 million PLUS additional FY10 $$ 13 to 18 doesn't Wynelle get? The bulk of the wages paid went to outsiders and Mass is on the hook to pay for Hollywood big shots to pocket many millions mas. Que lastima!
Actually, the DOR report states that "the state collected $3.6 million more in taxes than it paid out in credits during that three year period [that the incentive has existed]—because the law requires that filmmakers must first spend money in Massachusetts, and then pay taxes on that new spending, before they can receive or redeem any tax credits" and calculates the three-year average cost to taxpayers of .16 per $1.00 of economic activity generated. There's a big mis-information campaign going on right now, and, unfortunately, you guys got taken in. Do some digging on this story and you'll see the film tax incentive is bringing millions of dollars into the MA economy.
