Hollywood tax breaks may be on cutting table
WASHINGTON — From Capitol Hill to state capitals, real-life Hollywood cliffhangers are being played out over tax breaks designed to woo the motion picture and television industry.
Lawmakers are re-evaluating the generous tax incentives they provide the film industry. Many say it's not worth the money, especially when governments are facing tight budgets and Hollywood is enjoying a record $35.9 billion in worldwide box office receipts — $10.9 billion alone from the United States and Canada.
“They're learning that the incentives don't live up to the claims of their proponents,” said Scott Drenkard, an economist for the Tax Foundation, a longtime critic of the breaks. “The main reason they are popular is they're a little bit sexy. They give politicians the ability to rub elbows with movie stars.”
The industry and its allies are fighting back, though, saying they bring jobs and tax revenues anytime they produce a movie or TV show in a U.S. location.
“Tax incentives are creating jobs and promoting economic activity,” said Vans Stevenson, the senior vice president for state government affairs at the Motion Picture Association of America. “You see so many success stories because there is a significant return on investment, and that is true across the country.”
Nationwide, the MPAA said, the television and film industry supported 1.9 million private-sector jobs and $43.1 billion in wages in 2011, the most recent figures available.
Thirty-nine states and Puerto Rico offer film and television production incentives. Ten states alone provide the film industry with $1.4 billion a year in tax breaks, according to a report that California's Legislative Analyst's Office released last month.
But some states now are saying “cut” to tax breaks.
Arizona, Idaho, Indiana, Iowa, Kansas, Missouri and Wisconsin have halted their incentive programs or left them without funding in their coming budgets, according to the National Conference of State Legislatures.
And incentive programs in other states might be on the verge of fading to black.
North Carolina has been one of Hollywood's most aggressive suitors, attracting big-ticket films such as “Iron Man 3” and “The Hunger Games” and television series such as CBS's “Under the Dome,” NBC's “Revolution” and Fox's “Sleepy Hollow.”
Now, however, its legislature is reconsidering its incentive program, which provides producers with 25 percent refunds on in-state spending up to $20 million.
“Some of the credits have a return on investment, and some don't,” said state Rep. Rick Catlin, a Republican. “We're already in the hole, and we're trying to find money to give teachers a raise. We're going to have to compromise to extend the film credits.”
Industry executives contend the film business has been a boon to North Carolina, responsible for 4,200 full-time jobs, 15,000 part-time jobs and $160 million of goods and services sold locally.
In Maryland, lawmakers had tried to curb tax breaks for Netflix's popular political drama “House of Cards.”
The show's producers let loose a hardball power play seemingly right out of the playbook of Francis Underwood, the series' main character, played by Kevin Spacey.
The producers abruptly threatened to take their lights, camera and economic action elsewhere. The state reconsidered and came up with $11.5 million in tax incentives and state grants to keep the show in Maryland.
Even California is debating the tax credits.
Some legislators, including Republican gubernatorial candidate Tim Donnelly, propose expanding California's $100 million tax-incentive program.
“We shouldn't be following and trailing behind places like Georgia and Louisiana and Canada,” Donnelly said. “It's time to bring Hollywood home.”
But Neel Kashkari, Donnelly's Republican primary opponent, balks at the idea.
“I know that other states are subsidizing movies now, up to 30 percent of the cost of a movie, which is silly economic policy,” Kashkari told The Sacramento Bee. “If other states or other countries are going to do silly things, then let them do silly things.”