In the era of soaring deficits and talk of imposing “austerity” on the public, one has to wonder if there are other expenditures in state budgets that could be eliminated to at least lessen the impact of cuts in wages and services. It turns out there are and one example is the film subsidies that many states including Pennsylvania hand out each year.
Missouri was the first state to explore film subsidies when it started offering $1 million in film incentives to production companies in 1999. Pennsylvania instituted similar incentives in 2004 and expanded them three years later under Gov. Ed Rendell. Under the program, filmmakers can apply 25 percent of production expenses in Pennsylvania to offset other state taxes, provided at least 60 percent of total production expenses occurred in the state.
When Gov. Tom Corbett gave his 2011-2012 budget address on March 8, he announced that he would keep the program. “The film tax credit, which we are retaining – and never thought to do otherwise – will attract jobs and pump money from outside the state into our economy.”
Corbett’s budget continues the tax credit in the amount of about $60 million. According to the governor, however, this is merely an investment that will have greater returns for the state by bringing the film business to Pennsylvania. He argues that the personnel hired and some of the taxes raised should create a net gain for the state.
It is the same argument made by the other 42 states engaged in subsidizing the film industry. Many take issue with this and consider it a fallacious claim.
The Center on Budget and Policy Priorities (CBPP) does research and analysis on fiscal policy and public programs that affect low- and moderate-income families and individuals. The CBPP recently reviewed some of the only independent and empirical studies done which found the film subsidies to be wasteful and ineffective. The report reviewed various claims that advocates often give.
Job creation for PA residents is one of the leading justifications for the tax credit program. The CBPP report found that while this is true, the hiring of Pennsylvanians is largely for menial tasks that are part-time and low-paying. The better paying jobs require skills that residents here tend not to possess. Talent from Hollywood and New York City is often brought in to fill these positions.
As a result, the portion of the payroll going to residents amounts to a relatively small amount. In a Massachusetts study, residents earned only 40 percent of the total payroll generated both directly and indirectly by the Commonwealth’s film tax subsidies. Temporary low-paying jobs are not exactly a foundation for economic growth, especially when $60 million in taxpayer money is being used to fund them.
Another oft given reason for having the subsidy is that it is a “win-win” situation for the industry and the state. The Motion Picture Association of America (MPAA) claims that governments generate enough tax revenue from film productions so that they can expand services even as they offer film producers generous subsidies.
The CPBB found otherwise though. Their report shows that Pennsylvania only recoups $0.24 for every dollar given as a subsidy. The state also loses approximately $13,000 in tax revenue for every job created.
The studies that the MPAA and others rely on were also reviewed by the CPBB. The group found that these were commissioned by either the MPAA or state film offices. These studies of course show that there is a net gain in tax revenue for the states and local governments. The CPBB found them severely flawed, however, having looked closely at their methods.
The CPBB reported that tactics such as double counting money spent in the state as well as making unexplained “adjustments” to key figures such as salaries and spending were used. The lack of transparency is telling. Many of these studies grossly overestimate tourism revenue brought in due to filming as well.
The continuation of this largess is indefensible. The truth is that this program wastes money that the state cannot afford to lose. As Nathan Benefield of the Harrisburg-based Commonwealth Foundation said, “A tax break for the film industry requires higher tax rates on everyone else, hindering job creation in other sections of the economy.”
That this film subsidy program is a waste of $60 million of the taxpayers’ money should be apparent to everyone in Harrisburg. If tax breaks are to be given out, they should be given to the hard working people of this state who are struggling through the current depression and not to film producers. Iowa, Kansas and others have dropped this program. Pennsylvania should join them.
James McKibbin is a contributing writer at The Publius Foundation.
if you think film work is easy, i will personally take you to work with me for one day and you will cry like a child by the end of it. we ARE the hard working people of this state, you dolt, and we actually do “tend” to possess theses skills, because we’ve been making films here for quite a while. it’s called the film industry for a reason, it’s a business and the independent study released by the legislative budget and finance committee proved it to be a money maker for the state. http://filminpa.com/wp-content/uploads/2009/06/Independent-Analysis-Validates-the-Effectiveness-of-PA-Film-Tax-Credit.pdf
do your research idiot. you need volume to make incentives work and we’ve been increasing the amount of productions since the credit was enacted. bottom line, we can and will be a force to be reckoned with in the industry so long as we keep productions running. we’re a state capable of doing just that given the chance. if it makes fiscal sense, why the opposition?
No one ever said that working in the film industry was easy. Indeed, I’m sure that it can be hard work just as work in any industry can be hard. That isn’t the issue.
The issue is that Pennsylvania taxpayers are subsidizing the film industry in this state and this subsidization is not a net win for state taxpayers. As the article above points out, the state only recoups $0.24 for every dollar spent through the tax credit.
Not only does the tax credit not make fiscal sense, it is also profoundly immoral to take money from taxpayers in other industries and hand it over to the film industry. After all, what makes you or any other film industry employee more deserving than someone who works in manufacturing, retail or energy production? Indeed, if you and your co-workers are such skilled workers (and I have no reason to doubt that you are), why do you need Pennsylvania taxpayers to spend money to secure you work?
how can it possibly be immoral?
it’s business. who are you to differentiate the moral and immoral? if that’s what people want to use to “level the playing field”, then my work should be considered along with every other industry in this state. am i more deserving, who knows, i’m not a law maker, i’m a tax paying citizen like you. i’m personally not a big fan of subsidization at all, but you want to differentiate who is worthy and who is not, good luck with that. run for office if you want change, that way you can make it yourself,but don’t even try to assume moral high ground, that’s just ludicrous.
grow up, your stance is absurd. if NO states had tax credits for the film industry, it would make sense, but that is not the case, many states do. and nothing makes us more worthy than other citizen’s except money spent. again see the report, we had no influence over the company doing the study, they reported what they found, and apparently that’s enough to sway politicians in pa..
First off, I never said anything about your work being easy. In fact I have a friend that was involved in film for years and I know how hard it was for her. Being in a hard line of work does not justify handouts from the government.
Second, the link you provided is 2 pages that make some assertions in your favor. I wonder whether you actually read the CBPP report though given that the ERA study is listed as the source for their PA statistics. The CBPP addresses some flaws in studies like that of which I only just mentioned briefly in this article. Perhaps you should take your own advice and do a little more research and find what the objective truth is, not believe what you want it to be.
Third, it is absolutely immoral to subsidize any industry. Government gets its money through the barrel of a gun and forcing the taxpayer to favor one industry over another is wrong. You don’t need to figure out who is deserving, the answer is no one. The fact that other states do it is equally wrong and 43 wrongs do not make a right. The answer is for all states to repeal these programs and let the market decide where films should be made and at what frequency and cost.
I understand you probably depend on this tax credit to make a living. The problem is that this program should never have existed in the first place. Government distorts the market with all this intervention and it is indeed painful as resources and labor are reallocated to other sectors of the economy when that artificial support is withdrawn. We are better for it in the long run though. Perhaps next time a similar proposal to intervene in the economy comes up we can count on your support in fighting against it.
It is immoral because taking from one person’s pocket to donate to another person is simply theft. You have no right to stick your hand in my pocket and take my money to give away, no matter how good the cause may be. Give away your own money.
The best way to have a level playing field is to stop all subsidizing. Industries should be able to stand on their own and not be carried on the backs of the people. The problem with subsidizing is amply demonstrated in the responses here. It creates special favors that pit one citizen against another. As in, “Hey my work is just as important as anyone else’s so I should get the subsidy. See here, my industry wrote up this special report about how special we are and how we deserve special treatment and so that makes it OK! So bend over my fellow citizens while we special people take our pleasure at your expense.”
“By the way, my industry has gained the right to rape the citizens in the next state over, so what the heck is wrong with you folks in this state that you don’t want to be raped too? Don’t you realize how special my job is, how famous and important I am, and how my rights cancel out yours?”
We don’t have capitalism in this country and haven’t for a long time. Yet the uneducated idiots cry out that we should get rid of capitalism because it failed. What we have is communism, which is a type of socialism, in which some unelected government official doles out money to his favorite buddies at the expense of everyone. This is done in the form of subsidies, no bid contracts, special tax exemptions, grants, bail outs, no interest loans, price fixing by marketing boards and a list of other giveaways.
So who are these unelected government officials that they should decide what is moral and immoral, especially since they are influenced by bribes? How can that be a standard for a fair and moral decision, even in a socialist system? It isn’t. And it sure isn’t capitalism or a free market system. It always sounds good when you are the recipient of the largess, but not so wonderful when you wake up and realize that far more is being extracted from your pocket than is being put in. Plus you lose your freedom and become a slave to government, who you are now dependent upon. What a great deal, hu?