Cut through the film tax credit fiction
There was an interesting cluster cluck in Harrisburg Wednesday last — a joint hearing by the Senate and House Democratic Policy committees on Pennsylvania's Film Tax Credit Program.
The credit “is a glowing example” of a legislative success story that has led to jobs and economic development, said state Sen. Lisa Boscola, D-Northampton, in a news release after the session. “When we help business expand, hire more workers and invest in our economy, many of our funding and budget challenges will take care of themselves,” she wrote.
Would that it were true.
The tax credit was adopted in 2007. To be eligible, motion picture or television projects must spend 60 percent of their respective shoots' budgets in Pennsylvania. Only then is a 25 percent tax credit applied to qualifying production expenditures. Proponents claim the credit is directly responsible for the creation of 18,000 jobs and $739 million in wages. They also claim “economic activity” of nearly $2 billion.
Supporters say the current annual allotment of $60 million is not enough, evidenced by the fact that it's exhausted quickly and leaves too many productions credit-less and, thus, headed to other states with larger incentives.
Pennsylvania's cap is “damaging” and “unrealistic,” union types argue; the Keystone State must create “a competitive tax incentive” program to keep production here, they add.
Never mind the growing scholarly research that suggests the “benefits” of the tax credit are as fictional as the Hollywood efforts they subsidize. Worse, most of the reportage on the topic is cheerleading that accepts proponents' win-win claims as gospel.
One of the freshest studies to question the benefits of the film tax credit came last fall from University of Pittsburgh researcher Ashley W. Edwards. “While it is tempting to say that Pennsylvania can and should try to create economic diversity by developing and supporting a film industry until it can sustain itself without a tax credit program, a closer examination of the policy reveals three major problems,” she writes:
• It's difficult to predict the productions' actions if no tax incentive is available; many films and programs have been, are and would be produced without it.
• The “race” against other states' incentive programs to attract productions creates a never-ending battle; it's an arms race with your wallet — a “race to the bottom.”
• The film tax credit “generates a net loss of tax revenue for the state and does not create the purported number of jobs”; many are low-skilled or “shifted,” temporary and with no upward mobility; industry-generated studies claiming otherwise are biased.
Ms. Edwards also reminds that the film tax credit is transferable — “the production company may sell its remaining tax credits to other Pennsylvania taxpayers,” she reminds. And in fiscal 2011-12, 98 percent ($64.3 million worth) of film tax credits “were either sold or transferred to another entity, with just $1.4 million used by the initial tax credit recipient to reduce its Pennsylvania tax liability.”
Taxpayer wealth is transferred to “affluent third parties,” notes Edwards, who also exposes a number of transparency failures and accounting tricks by the king of such nonsense, the Pennsylvania Department of Community and Economic Development.
“The Legislature must look beyond the local media and their starry-eyed constituents and carry out more balanced studies to study the real costs and benefits of the film tax credit,” Edwards concludes.
Indeed, it's time to expose this cluster cluck once and for all.
Colin McNickle is Trib Total Media's director of editorial pages (412-320-7836 or email@example.com).