Bad LA film tax credit fix better than none

Louisiana seems set to test, in the case of the Motion Picture Investors Tax Credit, whether bad legislation is better than no legislative solution at all.

This week, the House of Representatives likely will take up and approve of SB 254 by Democrat state Sen. JP Morrell. It tinkers around the margins with the film tax credit program that independent study after independent study has demonstrated costs Louisianans far more in income tax rebates paid out than in revenues supplied to government as a result of its existence.

Besides this transference of a large amount of wealth from taxpayers that could fund other priorities such as higher education and health care to a relatively small number of individuals, mostly outside the state and/or wealthy, the law has attracted a number criticisms at which the bill hardly addresses. It establishes a cap of requests for credits at $150 million a year and a payout of $180 million annually, which can be rolled forward or backwards for years with excess requests, for the next three years which then declines to $150 million for the next five. This period of higher paying takes up slack from credits banked from previous years.


Other changes try to improve program performance and spread out its largesse. It reduces the overall proportion rebated from 30 to 25 percent unless production occurs outside of where the vast majority has occurred in the past, the New Orleans metropolitan area; restricts use of some total available funding to smaller and local productions; and provides bonus payouts for Louisiana-certified content in labor provided, up to 40 percent total.

It also caps reimbursement for any one person at $3 million worth and adds jobs credits only those created in the state between $45,000 and $66,000 in annualized salary and a higher one from $66,000 to $200,000, in an attempt to encourage job creation beyond the menial and not geared towards the highest positions more likely filled with out-of-state industry members. Finally, it reduces the production maximum to $20 million per film and $25 million per season of non-reality television series.

Additionally, it makes more difficult fraud commission which has wracked past efforts. Producers will have to follow more stringent vetting and reporting requirements, and no longer can brokers buy and sell credits. The latter ability enabled those issued credits, almost always from out of state with limited Louisiana tax liability, to sell these to Louisianans owing large amounts in taxes needing offsetting who profited by the percentage discount they paid for these. Now, the only recourse for holders will be to sell them back to the state at 90 percent of value, up from 85 percent.

That payoff increase and the high level of permissible payouts make this a bad bill. The continued lofty ceiling, which only a handful of states all much larger in population than Louisiana exceeds, only contributes to the state having the second-highest total of disbursements historically among all the states; unfortunately, an attempt to amend the bill to set a more rational, lower ceiling of $50 million failed in the Senate. Increasing the reimbursement proportion only compounds the draining more taxpayer dollars.

Only the fact that in a year the program would lose any cap and that it automatically sunsets in 2025 partially offsets its other nauseating features. That it retains its basic philosophy that still permits overgenerous wealth transfer from citizens to a special interest makes it objectionable. But without some fix, a bad law would be worse still, even if the change likely means policy-makers won’t revisit a horrible deal for some years.

And its continued existence in this form reminds why Louisiana drags the rear when it comes to economic development, as that takes a back seat to politics.