The Hollywood tax wars: It’s on
posted at 4:01 pm on February 25, 2014 by Erika Johnsen
As Ed described last week, the House of Cards producers recently served the state of Maryland with their demands for more sweet cash monies in the form of state taxpayer subsidies — despite the almost $40 million worth of subsidies the show has already received and their rather dubious job-creation claims. Maryland is hardly the only state on the receiving end of that kind of pressure from the entertainment industry, either; Watchdog.org reports that Florida’s production industry is currently lobbying lawmakers for a whopping $1 billion in various tax perks, and the pros of all of that largesse aren’t at all clear:
The giveaways, or subsidies, allow for selected companies producing films, commercials, music videos, “high-impact” television shows and interactive websites to skip out on as much as 30 percent of their tax bills as long as they’re working in Florida.
Everyone else will pick up the difference, Matthew Mitchell, senior research fellow at the Mercatus Center at George Mason University, told Watchdog.org.
“The vast majority of evidence suggests these are not schemes that raise more revenue than they lose,” Mitchell said. “Clearly, the taxpayer loses.” …
“Even if a state economic development office can track the number of jobs it created, it’s not effective at discovering how much higher prices are that consumers will have to pay, how much higher taxes are for consumers to pay the difference or how much economic exchange didn’t take place because of those higher taxes and prices,” Mitchell said. …
From 2003 to 2010, the Florida legislature dished out about $73 million in tax credit to the entertainment industry, but between 2010 and 2013, that price tag shot up to $296 million — and industry reps are now pushing for a solid $1 billion by 2020.
This is all part of a growing pattern of states awarding generous benefits to a conspicuously glitzy industry; over the past decade and change, California has been losing entertainment industry jobs to states that can offer up the biggest tax boons — and California is looking to get back in the game, via Politico:
Tired of seeing other states pony up big cash to attract television shows, movies and jobs, California is looking to boost its own tax breaks for entertainment projects.
Democratic state Assemblyman Raul Bocanegra plans to introduce legislation in February to increase California’s $100 million-a-year budget for film and TV tax incentives and expand the type of productions able to claim tax credits to big-budget films and network shows, which are now excluded.
It may seem ironic that the home of Hollywood needs to persuade studios to shoot in the state, but budget-tightening in the past decade has led to a system where nearly all location decisions are based on how much cash states dangle before production companies. …
“California is now just trying to recover the loss that was created by this tax war,” said Paul Audley, the president of Film L.A., a firm that helps studios secure permits. “California is really just trying to restore its signature industry against an onslaught of free money from other states.”
I understand that production companies are businesses just like any other, and they are rationally responding to the incentives that more than 40 states now seem to think it’s a good idea to offer them in this escalating tax-break battle — but I must say, I find it rather irritating that these Hollywood liberals can apparently recognize the (in their case, questionable) trickle-down economic benefits of lower taxes in their industry, but they content themselves with grabbing crazy tax breaks for themselves while generally continuing to use their hefty bank accounts to campaign for the Democrats that push for higher taxes for everybody else. I thought progressives just loved taxes — levying them, paying them, increasing them in order to subsequently redistribute them — so why are these guys using their glamorous clout to avoid contributing their share of them? Weird, isn’t it?
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