Film Tax Credit Programs Should Remain Capped (If Not Eliminated Entirely!)
According to the Business Journal of Milwaukee, the state government in Wisconsin spent $40,000 to attract a film project that features the actor who played the cab driver from Wings, and now he is lobbying for the state to spend more.
It’s notable that this $40,000 figure is much lower than the cap on film tax credits in Wisconsin, my home state, which is currently $500,000 a year. That’s only 8 percent of the maximum allowed! Furthermore, the existence of the cap obviously didn’t prevent the project from being made — since it was made.
Wisconsin has had difficulty with its film tax credit program in the recent past, and that’s why the state scaled back its program. From an earlier article on the subject that appeared in the Business Journal of Milwaukee (emphasis mine):
Producers [of the film Public Enemies] spent more than $18 million, but the [D]epartment [of Commerce] said most of that money went to out-of-state workers and for out-of-state services. Wisconsin’s real economic impact — money spent here, wages to Wisconsin employees and tax revenue from those wages — equated to $5 million. At that level of spending, the $4.6 million in tax credits nearly wipe out the fiscal benefits of the tax incentives program.
Similar to Wisconsin, the state government in Missouri should consider instituting limits and sunset clauses to control the cost of tax credit programs, given that the fiscal notes have had poor predictive power. This was proposed in the April 2010 report from the state auditor’s office, which pointed out that, of the 53 programs redeemed in 2009, 23 did not have annual or cumulative limits. The report also observed that it is difficult to predict the long-term effects of specific tax credits; with a sunset provision, the effects are reviewed and evaluated before a program is continued. Annual and cumulative limits would hold tax credits to the amount specified by the bill, which would discourage underestimates as well as control tax credit expenditures.
Furthermore, cutting the film incentive program in Wisconsin doesn’t not mean that major motion pictures will not be filmed in the state. On the contrary, the film industry is thriving in Wisconsin without it. Parts of Transformers 3 were filmed in Milwaukee this past summer, and the project didn’t receive a cent of subsidy from the state government. Transformers 3 is a blockbuster movie — much larger than the PSA project described in the article — and its producers decided to film in Wisconsin based on the merits of the region.
Missourians and Wisconsonites would both be better off if they attracted companies that were profitable because they engaged in activities in the unrestricted market — not those that are profitable because they exploited the political and economic environment through programs like targeted tax credits.
