Even if playing with house money that eventually sunsets the program, Louisiana legislators should reject allowing the state’s Motion Picture Investors tax credit to bleed, even if reduced fashion, the state for another dozen years.
In this session, legislators have the option of extending the life of the exception past its scheduled end-of-fiscal year 2025 sunset. HB 562 by Republican Speaker Clay Schexnayder would give it another decade of life after that, and originally would have freed it from a $150 million annual cap on issuance although the $180 million annual cap on redemption would remain.
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 (minus two percent as a transfer fee). Almost all monies paid out occur through this route, as according to the latest data nearly 97 percent goes to corporations, and overwhelmingly to out-of-state entities that have minimal Louisiana income tax liability. Simply, it’s taxpayer dollars siphoned directly into the pockets of filmmakers, only some of which makes it back into the state’s economic stream.
And not very much at that. Data show Louisiana taxpayers take a bath on this, even as supporters throw out figures about how much revenues and jobs the industry generates. The fact is, it loses 77 cents (another estimate puts it closer to 95 cents) on the dollar, with each job generated costing about $13,300 each (and the methodology suggests this exaggerates the actual full-time employment, making each job cost to taxpayers more like $25,000). Nonetheless, this vampire staggers on as special interests jealously guard the transfer of taxpayer wealth to them and have mesmerized a number of legislators who should know better to back them.
This was apparent at the April House Ways and Means Committee hearing, with dozens of beneficiaries of taxpayer largesse and their representatives in attendance. Schexnayder testified for it and offered up minor amendments, most prominently putting a FY 2035 sunset back on. It garnered unanimous support, which appeared unusual particularly as one committee member in support, GOP state Rep. Philip DeVillier, had a bill cued that would have restricted the program and extensively questioned testifiers, and another, Republican state Rep. Tanner Magee – Speaker pro tem and a Schexnayder ally – mentioned he felt threatened by intense industry lobbying but would vote for it.
But when the House dealt with the bill last week, it seems something had been up. There, DeVillier offered amendments that would scale back the transferability of the credit by 7.5 percent through the sunset date, which now only can happen to the state as previous changes to the law discontinued transfers between individuals and corporations after FY 2017. This would allow for the backlog of claims that take years for application after issuance to be turned in and paid off. (Even if terminated on schedule, paying off will continue for years.)
In other words, DeVillier’s amendment – which could be seen percolating during his committee questioning – gradually ends the cash rebate which constitutes nearly all of the credit’s cost and makes it a more defensible credit only on tax liability (which in the film business often wouldn’t be owed anyway because for films income generated from within state boundaries less deductible expenses often is less than zero). Further, it disallows banking credits for future use.
It is an inspired way to wring out its most objectionable feature over time, yet still trigger the eventual neutering and termination while placating a significant number of usually fiscally conservative Republicans who throw out the window principles when the bright lights of Hollywood shine in their eyes, by forcing them to acknowledge, as DeVillier noted during floor debate, that the program was established on an intent to wean itself from taxpayer assistance after industry establishment. Even more interesting, Schexnayder apparently acquiesced to this arrangement, which only could happen if a large portion of legislators – obviously Republicans as seldom ever has a Democrat voted against this giveaway – signaled they wouldn’t support the bill without it.
The amendment was added on without objection (despite some grumbling from economic illiterates such as Democrat state Rep. Mandie Landry, who alleged no business makes money without government subsidization and admitted she couldn’t understand the economic arguments against the bill), and the bill passed with only 23 Republicans voting against. Several who voted against also voted for an amendment, turned back by the body, that would have had subsidized films list in their credits the amount of subsidy.
Things became still more interesting days later when Magee offered an amendment during debate of HB 1, the general appropriations bill, that would provide $51 million for early childhood education, essentially to replace temporary federal funding going away, if repealing the entire film tax credit. It was the only amendment to make it onto the bill and hypocritically opposed by almost every Democrat, who had caterwauled the absolute necessity of replacing the federal money with state money yet voted against it to allow state dollars to make more movies.
That loomed only symbolically, as no move is afoot to repeal the credit immediately. However, HB 562 in its present form will have a delayed but growing salutary fiscal effect and is another way to skin the cat.
Nonetheless, even if it puts the program in far better shape than at present if passed, the bill still should be defeated. The industry has known for years about the sunset in just over two years and has had three decades to build itself to the point that it can attract makers of movies, and if it hasn’t done it by now, it’s not likely ever to. Even as weaning has its benefits, it’s a stay of execution where its beneficiaries gain time to work in the future to prevent its needed extinction and to restore refundability.
Any legislator who calls himself a “fiscal conservative” or “fiscal hawk” should ask himself two questions on this issue: if the benefits are so great should not the state remove the caps and sunset and argue for unlimited 100 percent refundability, and if he truly believes that government should subsidize the private sector in this fashion then should not the state enact programs like this for every industry, vastly expanding government and tax burdens, such as in manufacturing widgets? If unable to answer the affirmative to both, ideological consistency and adherence to principle demands a vote against.
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