It’s time for Louisiana to stop swimming against the tide and use money thrown away on making movies for more important needs – especially as larger economic trends threaten to wither away the program.
Recently, New Orleans’ film office director and city councilors griped about how film production statewide but in the city particularly had taken a tumble. Years ago, a billion dollars a year was coming into the state in production costs, but now that has dropped to $185 million. This matters according to advocates of using government as a direct jobs creator as fewer jobs result from a dive in production value. Thus, they call for increasing the generosity of the state’s tax credit regime, which already is quite lucrative: 25 percent tax credit for all production costs and 10 percent more if an in-state screenplay and 5 percent more if outside the New Orleans area, and then 15 percent more on compensation for all Louisiana residents used plus 5 percent on special effects past $1 million. The maximum base is 40 percent.
Further, the credit is almost entirely refundable, meaning investors outside the state without Louisiana state income tax liability can reap all of these benefits, at the 88 percent level, meaning taxpayers pick up the tab. In a recent ranking of states, the state winds up sixth-best in generosity, and doesn’t have a higher showing only because it caps the amount of credits issued and paid per year at $125 million, something advocates for more largesse wish would revert back to the previous uncapped that also would speed up claims paid out.
But there is a reason such limits were instituted: the program is extraordinarily wasteful. The latest data show it makes back through taxes from film-related activity only 23 cents on the dollar for fiscal years 2023-24 or $225 million spent with just $51 million collected. Another way of looking at it, every job created from the credit cost taxpayers over $10,000 per year.
And it’s only going to get worse. More generous incentives might suck in more business from other states, yet that ignores the larger problem that incentives not tax related really drive financial calculations in making movies these days, and away from America.
When reviewing tax incentives promised by other countries, few stand out as generous as Louisiana’s. Further, most of those that are occur in countries that have much less infrastructure in filmmaking or carry other negatives. Among developed economies, no country in the world has a better incentive structure than Louisiana, and many carry additional burdens such as a requirement displaying the county’s culture in a positive light.
Yet now these places increasingly grab U.S. business for three reasons. Firstly, in Eastern Europe particularly their standards of living of significantly lower, meaning lower labor costs. Secondly and complimentarily, the hyper-expensive unionization of the American industry, both in the wages it demands and in its complex fragmentation, is absent outside the country with its residents. Thirdly, the permitting process for shoots often is much less costly and complex than in the U.S.
So, the smart thing would be to throw in the towel, as a dozen states have done in the past decade (although a few states have expanded or added programs this year while calls have come to Congress to enact a federal tax credit). That would save up to $125 million a year, and even backing out the calculated tax collection gain still leaves taxpayers in the neighborhood of $100 million to the good.
The Legislature came close to excising the program two years ago. And with Republican elected leaders promising to phase out the state’s income tax, even in the face of a temporary sales tax increase to roll off soon, the whole idea will become moot anyway. Why not beat the rush and sunset the program at the end of this fiscal year?
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