New ploy but same infirmity to film tax credit

Prepare to hear a lot of squawking from grifters enjoying, directly or indirectly, taxpayer largesse from the Motion Picture Production tax credit as it rests on the chopping block in Republican Gov. Jeff Landry’s tax reform agenda. Much of it is recycled drivel, but there’s something new under the sun worth ridiculing.

The facts about the program’s wastefulness to taxpayers are indisputable. Even under the most optimistic assumptions, at best it returns 40 cents on the dollar, and subsidizes each job “created” (regardless of whether full time) to the tune of $13,300 each. Given recent data pointing to $500 million worth of credits issued since 2018, that’s a loss to taxpayers of at least $300 million (if all are redeemed, and typically within a few years are).

Supporters will spout off that, regardless of huge taxpayer costs, economic activity is created, such as an estimate that a buck of incentives induces $1.60 in economic activity. However, in isolation this is a meaningless figure because it doesn’t compare to alternate uses of funds, inside or outside of government. As compared to other tax credits, for example, the Digital Interactive Media and Software Tax Credit does better, so why not shut down the film one and transfer it all to the media and software one? More to the point, in the private sector if these dollars stayed in the hands of individuals, they almost certainly would invest differently and in enterprises that create far more jobs and wealth than making a bunch of movies and television episodes.

Comes forth to this another perspective, which is to argue that other kinds of government subsidization should get axed first. Cleverly, to go first it picks one of the most flawed and high-profile of these, the Industrial Tax Exemption Program that lends itself to conspiracy theories about the state being raided by outsiders as beneficiaries of this often are large out-of-state firms.

ITEP seeks to bring less disadvantage to Louisiana’s property tax system that places the overwhelming burden onto business, by allowing waiver of these taxes if the state, with local input, thinks it appropriate. It applies only to that kind of tax and is available to any firm in any industry, as long as it can convince the state’s Board of Commerce and Industry (gubernatorial appointees), with input from relevant local governments, of its merit. In the bigger picture, ITEP is a necessary evil precisely to ameliorate bad tax policy that punishes economic development.

But as bad as it is, it’s far better than the film credit, not the least because it an apples-to-oranges comparison. First, state taxpayers aren’t subsidizing ITEP, it’s local governments forgoing as much as 80 percent of revenues for up to a decade as a means to secure this new business, so it has nothing to do with expenditures that affect balancing the state’s budget – except that siting new or expanded firms produces taxable incomes and sales that contribute to state revenues. Second, ITEP’s are actual taxes forgone while the film credit stupidly is refundable – not only does it reimburse for computed income taxes forgone but also if the amount eligible is higher than paid, then taxpayers cut a check at 88 cents on the dollar to the producer on the difference which is typically the lion’s share of credit expense since state tax levied on production usually ends up quite low in amount.

Because, third and particularly rich given complaints that ITEP recipients often are national or multinational corporations, that overwhelming majority of the film credit amount goes to out-of-state moguls, often based in Hollywood, who come into the state like locusts only there because Louisiana had the highest bid given their filming requirements, throw crumbs to the locals, and then hightail it out having stripped taxpayers of refundable credits. Finally, ITEP-approved projects almost always stimulate real, ongoing economic development, as opposed to a fly-by-night digitized presentation the quality of which often barely can aspire to entertainment, much less “art.”

Trying to save film credits by declaring these the lesser of two evils compared to ITEP makes no intellectual sense and intellectually fails. It joins the long list of weak attempts to make any rational case for the needless giveaway that are the film credits, costing around $100 million annually when so many other pressing needs such as education or aiding people with disabilities, or even just returning this to taxpayers, exist within the state, rather than stroking egos of politicians and others dazzled that they feel they are in the television or movie business by making somebody else pay for their dreams.