Not that agents part of the traditional media in Louisiana are very
quick on the uptake on many issues of the day, but they finally
may be catching on to the fact that Louisiana has spent approaching a
billion dollars on corporate welfare for the film industry to get back pennies
on the dollar. Or, maybe
not.
Recently, the Shreveport Times
ran an editorial that questioned the need for the state’s sacred cow of motion
picture tax credits, editorializing on an effort by the leftist Louisiana Budget Project that reiterated
from state reports about the roughly 13.5 cents on the dollar in tax receipts
the state got for every dollar of tax credits they doled out to filmmakers.
Clearly, the attentiveness of neither the LBP nor The Times does them much credit, for in this space no fewer than 10
times starting in 2005
the exact same point has been made again and again, every so often taking the
newest data that would reveal the same old picture of wasteful spending, which
now is approaching a billion dollars worth of issued credits.
Why did it take a burn-through of a billion bucks for The Times to catch on despite this space’s
persistent analyses (and similar columns appearing in a publication that the newspaper
receives, Fax-Net Update)? Even the LBP
seemed to pick up on this faster than The
Times, as it issued a brief in opposition about the issue last
year. Regardless of how late it is to the party, it’s significant in that
it becomes the first mainstream media outlet in the state even to question the
merits of the program.
And at least it gets the message, because some still don’t. A
self-described New Orleans contributor to the online site of Forbes Magazine appears not only as
inattentive to the program’s wastefulness as The Times had been until now, but then actually lauds it, using the
same stale, flawed arguments that backers like Economic Development Secretary
Stephen Moret use, in criticizing the LBP report.
This author repeats Moret’s assertion that, despite the transfer of
hundreds of millions of dollars of lost taxpayer revenues to filmmakers and
investors (producers often sell the credits to Louisiana investors because they
typically have low state income tax liabilities), it’s a valuable program
because “third-party
economists have estimated the economic impact of film tax credits in Louisiana
to be nearly six times the fiscal cost of the tax credits.” Also in support,
she claims what should be taken into consideration is the “amount of new tax
payers the industry has created through businesses, jobs, property owners, and
industries that would not even exist in Louisiana had it not been for the
implementation of the tax credit program.”
Thus, she concludes, the LBP
report “fails to include very specific and proven economic impact benefits that
the state has received as a result, and raises suspicion as to why this report
was only just now released with two year old data.” Which tells us two things
about the author: she neither understands the program and the reports about it,
not does she understand economics.
In fact, the law requires a report issued every two years on the
program, with the last couple by BaxStarr Consultants (the next is coming up
this spring). In it, the consultants calculate the tax receipts attributable to
the presence of all the “new tax payers the industry has created through businesses,
jobs, property owners, and industries that would not even exist in Louisiana
had it not been for the implementation of the tax credit program,” to arrive at
the dismal returns numbers.
And the Moret soundbite continues
to be a red herring: it doesn’t matter what the “economic impact” of the
program is. To illustrate the absurdity of basing government policy solely on
the amount of “economic impact,” why not jack the credit up to 100 percent? For
every dollar spent in Louisiana to make a film, you get a buck back on your
taxes, which are resalable. Won’t that stimulate even more filmmaking and thus
more of an economic impact, even though the state would forgo even more tax
revenue with little increase in tax receipts? But do we really want a lot more kinds
of movies like that classic Drive Angry? Is this
subsidization so much more important than alternatives such as funding health
care, defraying unfunded accrued retirement expenses, or in a tax break for not
just movie makers, but for everybody?
To put it another way, what if a
tax credit program was introduced to support the propagation of the McKayla
is Not Impressed meme? Like movies, that’s entertainment. Like the movies’
tax credit, it would let go of revenue and shell out administrative costs in an
attempt to get, in this case, web developers to pay teenage Louisianans who
live plugged into their computers to do digital enhancements that might exceed
their realized costs, by the posting of such popular artistry on websites to
capture much traffic to create ad revenues. But does a government decision to
subsidize this activity really contribute to optimal economic development?
Wouldn’t it be better to minimize government involvement and let the marketplace
allocate resources to their best uses?
Defenders of the credits, like
the author, argue that without them, there would be practically no filmmaking
activity, hence the relatively small portion of outside dollars wouldn’t appear
anyway and the state isn’t losing anything because the tax credits given out
were on paper and the revenues forgone would not exist anyway without the
program. However, this ignores entirely that the credits are used mainly by
Louisianans who otherwise would be paying these taxes if the credits didn’t
exist, so the state mostly ends up financing tax shelters of the wealthy. And
after a decade of this stimulus now the infrastructure exists to suck in
filmmakers regardless of the presence of the credits, even if it is at a vastly
reduced level. Even at that low level, it’s cost effective without the credits
while it is not with them.
1 comment:
"And after a decade of this stimulus now the infrastructure exists to suck in filmmakers regardless of the presence of the credits, even if it is at a vastly reduced level. Even at that low level, it’s cost effective without the credits while it is not with them."
The infrastructure is not where it needs to be, but it's getting there and that is why we need the tax credits now. They are the reason for everything we currently have
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