Don't revive costly, wasteful LA film tax credit

The lobbying has begun in earnest for Louisianans to continue the equivalent of flushing their tax dollars down the toilet with Republican Speaker Clay Schexnayder’s HB 562.

Not only would the bill allow the Motion Picture Investors Tax Credit to continue past fiscal year 2025 it also would make it open-ended, where it currently has a limit of $150 million issued a year (with $180 million redeemable in a year). The credit allows for reimbursement of expenses in film or television production anywhere from 25 to 55 percent of expenses from a base amount of $50,000 to $300,000 on state income taxes; alternatively, these may act as a refundable credit at 90 cents to the buck (which is how the vast majority of the payout occurs given that few beneficiaries principally do business in the state).

The law requires an analysis every couple of years, and over the two decades of the credit’s existence those have shown it to be a black hole spending far more taxpayer dollars than what was returned to state and local governments, costing the state well over a billion dollars. The latest returned the typical dismal numbers for fiscal years 2021-22: total tax dollars collected were about an eleventh of what earnings were generated for, and the return on investment for the former year was 35 cents and the latter 39 cents, meaning for FY 2022 every dollar spent saw 61 cents evaporate.

These results largely mirrored another state-sponsored study that requires fiscal review of sizeable negative-return tax credits, thereby including this as it has the largest annual expenditures and losses of the bunch. The law establishing this research had it go back several years, grouping the results essentially into pre- and post-Wuhan coronavirus pandemic periods.

In it, the film credit over the two periods expanded the state economy (return on investment, using a different model) by about 40 cents to the dollar while returning to the state treasury about a sixteenth of the tax dollars spent. It did say at least for the roughly $180 million a year spent it generated about $75 million more in economic activity.

The other report also noted figures that tried to explain away the bonfire of taxpayer bucks. It claimed around 10,000 jobs were created – or in the neighborhood of $13,300 per job net taxpayer expenditures – and generated $1.15 billion to $1.2 billion in economic activity annually.

The latter is a particularly useless statistic. It tells little because it doesn’t investigate alternative uses of the apportioned tax dollars, either in spending choices by government or by leaving this money in the hands of people that earned it, that possibly could produce much larger economic benefits. For example, it could be that a Widget Investors Tax Credit subsidizing the production of widgets might create more jobs and activity.

Nonetheless, because that’s all they have, supporters repeat such data points ad naseum, and have manufactured another talking point by surveying residents about their perceptions of the tax credit. About two-thirds of respondents say they favor such a credit and a seventh think, out of a list also including health care, agriculture/seafood, “green” industry, petrochemical, high tech, none, or oppose tax incentives, that film is the most deserving to receive incentives.

Again, this is largely useless information from an instrument designed to advocate rather than get a true sense of the public’s attitudes about the program (don’t blame the pollster, who has to follow the dictates of the funder), by deflecting from concrete reality and realistic choices. Almost no respondents probably know the cost to taxpayers and 60 percent wastage proportion of the credits and likely would show a far lower level of support if they did. Instead of asking “Do you favor or oppose tax incentives to help develop the film industry in Louisiana?” changing the wording to “Do you favor or oppose tax incentives, which cost $180 million a year and return only 40 cents on the dollar, to help develop the film industry in Louisiana?” or changing “When creating tax incentives, which industry in Louisiana do you believe is most deserving of them?” to “Would you rather give $180 million a year in tax incentives to filmmakers or health care … higher education … farmers and fishermen … as a rebate to taxpayers …” etc., answers to those kinds of questions would be far more revealing and informative.

Legislators must not let themselves distracted or sweettalked by lobbyists away from the fact that the film tax credit is corporate welfare blatantly picking a winning industry with the people’s money that could bring much greater benefits to Louisiana if left in people’s wallets and/or applied to pressing state needs far more urgent than making more movies. Personifying the old adage that a stopped clock is right twice a day, this squandering of tax dollars is so blatant that even the Louisiana Budget Project can see through the waste promoted by the film tax credit.

Nearly a quarter century is enough to have gotten this industry off the ground without further need of taxpayer subsidies. Kill HB 562 and let the unnatural life of these end in 2025.