Film Incentives
The Race Continues
Recently Michigan passed a 40% tax rebate and a salary cap of $2 million per employee for films produced in that state in order to attract some of the billions of dollars available from the film industry. This is of course another part in the escalating competition between the states for a part of the film business.
Tax credits can be looked at as an investment. They bring in films that otherwise may not use a particular state as a location. Film production benefits hotels, restaurants, creates millions of dollars in revenue and creates jobs. Massachusetts has seen a half billion dollars in new economic activity since 2006. New Mexico experienced over $470 million dollars added to the economy from film production in 2007. Illinois had $155 million in 2007, $18.6 million of that came from the production of commercials.
Locally, Columbus reported that Public Enemies spent $350,000 in their town. The Milwaukee Journal Sentinel in a March 30th article gave some details on the production's spending such as $8000 at a local lumber yard. "Without the incentives, these benefits would have been enjoyed by another state." said Dave Fantle of Visit Milwaukee.
Although hard figures are difficult to obtain...on average, a television production spends approximately $85,000 a day on location for a 7-14 day shoot for a single episode. Feature films spend over $100,000 per day, and low budget productions and documentaries average between $15,000 and $35,000 per day. Television commercials average between $50,000 and $100,000 per day, and still shoots run around $25,000 per day. |
There are, however, varying opinions regarding the value of these tax credits. A fiscal impact analysis from Michigan's legislature expresses that the new 40% incentives will most likely result in a net loss in tax revenue.
...while the economic activity generated would be substantial, the fiscal impact of the bills is such that the tax revenue generated from the additional activity would be unlikely to offset completely, or in some cases, even offset significantly, the cost of the proposed credits and deductions, even over the long run. |
Wisconsin had a similar analysis in a Legislative Brief from February 2006 with a hypothetical example of a film with $10 million in expenditures that would result in a loss in revenue of $4 million. Industry figures declare that 50% of a production's budget is spent in the community in which it films. Most states that promote filmmaking in their states say that any loss in tax revenue would be minimal. Some describe the net result in tax revenue as "indeterminate."
In Massachusetts an article in the Boston Globe reported that tax credits have cost the state millions of dollars in lost tax revenue. A further Globe article quotes Representative Brian Wallace saying, "The story states that the film tax credits will cost the state $135.7 million and have created hundreds of jobs. First of all, they have created thousands of jobs, not hundreds, and generated $545 million in direct spending in Massachusetts. Close to $20 million of that $135.7 million will be offset by increased state personal income tax.This is not about rubbing elbows with Hollywood celebrities. It is about reviving an industry, putting people to work, and putting millions and millions of dollars into the Massachusetts economy. And tax credits have done just that."
In Connecticut an organization called Voices for Children has been criticizing the tax credits passed in 2006. Voices for Children’s Executive Director Shelley Geballe points to a report from the New England Policy Center at the Federal Reserve Bank of Boston that says, “film production stimulates little additional economic activity in other industries. Consequently, film tax credits do not pay for themselves’ by indirectly generating additional corporate income, sales, and property tax revenues."
"You can't be worried about naysayers," Connecticut House Speaker James A. Amann told the Hartford Courant. "We're building an industry. It's not just about tax credits."
Some people have misunderstood how these tax credits work and from where the money comes. This is not a return of 25 cents for every dollar in tax money collected. It is 25 cents paid from the state of Wisconsin for every dollar of approved production cost in the state. If we take the example of Public Enemies, Universal Pictures is receiving $3.9 million in tax credits for an expected spending of $20 million. To gain some perspective, $20 million spent on taxable sales it would generate $1 million in state sales tax. If it were all spent on gasoline it would generate about $1.8 million in tax. If it were used to buy cigarettes it would generate approximately $7 million in tax. Since the spending would be done in many different ways, it cannot easily be determined how much tax revenue would be generated.
It is not a new concept to use public money to attract business or boost the economy. The federal government passed a bipartisan stimulus package, part of which is to send checks to some taxpayers. In the Milwaukee area sales taxes were raised to pay for Miller Park. Some people took issue with raising taxes to pay for a baseball stadium but it's hard to imagine Milwaukee without Miller Park and the Brewers.
The simple fact is that over the last several years tax credits have been drawing work back to the United States. Some estimates say $10-$20 billion dollars a year have been lost to locations in Canada, New Zealand and other countries. Tax credits in the states, combined with the fall of the dollar, make it less expensive to produce movies here in America. The road ahead for Wisconsin will be tough because we fall behind many other states both in terms of incentives and infrastructure. Many people have worked very hard to get things started. Our incentives are not perfect and never will be. It will be a constantly evolving process in order to compete for film dollars.
It has never been the policy of Badger Guide LLC to tell people what to think. We do not create talking points. It is up to each individual to decide if film incentives would benefit your business or the state in general.
Your comments are welcome on this this topic:
newsletter@filmwisconsin.us
