Film Production Credits Go Too Far

There has been a fair amount of attention in the press on the variety of film production credits and grants that the majority of states offer to entice such work in their states. The attention hasn't all been positive though. In late 2009, the Wall Street Journal and others reported problems in Iowa where the incentives were used to purchase personal and lavish items - see "Build It With Tax Incentives and Hollywood Will Come" (10/19/09). The Governor temporarily stopped the program and in January 2010, the Governor's Tax Credit Review Panel recommended repeal of the state's two film project credits.

The National Conference on State Legislatures reports that 45 states offer some types of film production incentives (see list, 4/19/10). I encourage you to take a look at the list. Most of the incentives are quite generous. Michigan offers a refundable tax credit for up to 42% of the production costs!

Well, when states are contributing so much to the production of a film or commercial or other production, they just might also want to have a say in what is produced. This happened recently in Michigan. The New York Times reports that a movie was turned down as too horrific - "State Backing Films Says Cannibal Is Deal-Breaker" (6/14/10). Of course, it is really taxpayers funding these projects so perhaps film producers should be seeking public input in the states, or at least offering lots of bit parts or perhaps just free tickets (after all, the public shouldn't have to pay twice!)

These incentives violate several principles of good tax policy - simplicity, transparency, neutrality and economic efficiency. It seems like an odd thing for a state to incentive because the work is likely to be one-time. Why not reward businesses that are permanently setting up shop and creating a 21st century industry in the state? Or why not just offer a low tax rate and an incentive for hiring workers who live in the state?

What do you think?