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1.3.05

Lights! Camera! Corporate welfare for the film industry!

I was waiting on this one, and Johnny Rombach’s Legislative Fiscal Office delivered: the great hyped film tax incentive program isn’t all what it’s cracked up to be. In tangible terms, it’s costing the state money.

This only makes sense when one considers the state is willing to kick back 15 percent of costs when the tax rates for the additional production brought into the state all are lower. Income taxes from jobs created – 2, 4 or 6 percent. Sales taxes – depends where you are, but the state only gets around 4 percent. Even the gasoline tax, which in relative terms obviously fluctuates with price, is under the 15 percent level when a gallon gas costs more than $1.34.

So it’s no accident that for $350 million in production costs for 2004 only about $25 million in additional taxes was generated, an effective rate of a little over 7 percent. (Actually, the reported credits paid out in 2004 were $83 million, from which the 30 percent estimate of return on the foregone dollar produces the $25 million. But 15 percent of $350 million is $52.5 million. Where did the extra $30.5 million come from? My guess is this figure also includes the sales and use tax exclusion and the employment tax credit which could go into the 20 percent range – the 15 percent figure reported is from the investor tax credit only. If somebody from the LFO knows, drop us a comment.)

Now there are intangible benefits, too. "We also have to be careful that our calculations include the exposure to the state," said Sen. Lydia Jackson. All right, but that works both ways, in that the exposure to the state might not be all that great, or even positive. I mean, we all know New Orleans is supposed to have great food and music; do we need “Ray” or “The Dukes of Hazzard” (not even originally set in Louisiana in the television series) to emphasize what everybody already thinks about the state and its people? And what about the biggest effort to date, the remake of “All the King’s Men?” It’s about a corrupt southern governor. Do we really need another reminder sent to the rest of the world about our colorful political history?

(Helpfully, the Governor’s Office of Film and Television Development gives a list of films supposedly being produced in the state. Let’s see, “Elvis” – more music; “Lady Luck (Just My Luck)” – click on this and you tell me how it’ll show off the state in a serious way; “Faith of My Fathers” – no production information yet, but looks like it’s about seagoing ships; “Retirement” – grumpy old men go from Florida to Las Vegas so it won’t show too much of the state; “Failure to Launch” – hasn’t started shooting yet, but see “Lady Luck” comment above; and “Locusts” – no information about this one, period, but the title alone tells us the intangible benefits will be something on the order of “Hey, look at those locusts chew up the 200-year-old French Quarter. Golly, we need to visit there before it’s too late!”)

We have to recognize this program for what it is – just another of the many that waves all sorts of incentives in front of business but which never are cost effective. The only incentives that ever will create more benefits than costs are better education through more efficient use of resources and higher expectations, reduced corruption, and lower taxes. I see good progress with the first, slight success with the second, but, if anything, backsliding on the third. Having a bunch of movie stars around may be flashy, but it’s exactly a preference for that which continues to keep this state behind.

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