Time to rewind the state film tax credit

old cameraNew catering services. Sound engineering. Construction of sets. New sound stages. Trailers for sets. Porta-potties. All side businesses that claim to have prospered in Massachusetts ever since the state implemented a 25 percent tax credit on production costs and salaries plus a break on certain sales taxes to entice production companies to set up shop here.  Film production spending has increased nearly fourfold ($86 million to more than $315 million since 2006.)  Supporters of the film tax credit say that eliminating it could cost Massachusetts more than 10,000 direct jobs. And then, they add, there are the indirect jobs in restaurants, dry cleaning, florists and all the other sundries needed by people living on location for the duration of the production. But what has been the cost of having the tax credit? The different interpretations are mind-numbing and often misleading.

MassINC’s Commonwealth Magazine has covered the costs and benefits of the film tax credit since editor Bruce Mohl’s first piece in 2008. Relying heavily on state Revenue Department data, Mohl has charted how more than half the benefits go to out-of-state individuals. Than means subsidizing the enormous salaries of Hollywood stars. Other studies put just a third of the jobs as having gone to state residents.  The state’s Inspector General has called for an end to the credit, which, he said, has cost the state $411 million but has generated just $261 million in new spending. Industry figures compute the analysis differently: saying every dollar in credits led to $10 of additional spending in Massachusetts.

There’s no doubt that some gossip columnists (think Gayle Fee of The Track in the Boston Herald and Meredith Goldstein and Mark Shanahan of the Globe’s Names column) would have to dig deeper for its “celebrity” spottings.  But that is hardly enough reason to extend a sweetheart deal that isn’t delivering on its promise.

What’s really aggravating is that some film production companies actually sell their tax credits, and who’s buying them up? Banks and insurance companies wishing to reduce their tax liability.  This is crazy.

I’ve seen figures that each job allegedly spurred by the tax credit costs the state between $108,000 and $118,000. Governor Charlie Baker’s budget took aim at the film tax credit.  He wants to phase it out by 2017 and use the difference to expand the Earned Income Tax Credit for the working poor. That makes sense.  Phasing it out would cushion the blow (if indeed there is one) for those small businesses that say they have benefited from the tax credit.

Somewhere between 35 and 40 states have similar tax incentive programs, and many of them are also having second thoughts. Some are scaling back. Deval Patrick tried to cap the outflow in credits to $40 million, but the Massachusetts House, in fealty to the Teamsters, would have none of that.

The state is having to pare away a budget deficit of around a billion dollars.  So any questionable expenditure, including tax credits like this one, should be grounds for reassessment. And consider this.  My husband and I spoke recently with an LA-based designer who has made several trips to Boston to work on major films.  It was his considered opinion that film makers who discovered the city since the implementation of the tax credits have really come to like it here.  Phasing out the credits, he mused, would probably not be as much of a deterrent to shooting here as some of the industry boosters and bean counters would have us think.

Changing it is worth a shot.

I welcome your comments in the section below.

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