Skip to content

Film Tax Credits on the Chopping Block in Massachusetts

2 min readBy: Jared Walczak

Massachusetts’ film taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. credits ran an estimated $90 million in Fiscal Year 2015, but they could be on the chopping block if Governor Charlie Baker (R) and a diverse coalition of film incentive opponents prevail.

With so much money on the line, it’s unsurprising that proponents are fighting back. In one recent Boston Globe article, you have to wade through twelve paragraphs of the film industry terming the news “devastating” before arriving at a statement of what Baker has proposed or why.

Back in September, the Massachusetts Department of Revenue issued a study of the program’s first seven years, from 2006 to 2012. The figures are bleak. In 2012, $78.9 million in tax credits resulted in an estimated $100.6 million worth of in-state spending, generating $10.6 million in new state revenue. So not only did the state lose $68.3 million on the deal, but total in-state spending was only 25 percent higher than the cost of the credits. And it gets worse: between 2006 and 2012, the Department of Revenue estimates a net increase in in-state spending of $261.1 million attributable to film incentives—at a cost of $411 million in tax credits generated (some of which would be realized in 2013 or later). Each job created—most of them lasting less than three months, or even “a few weeks, or even days,” according to the Department of Revenue—cost an estimated $118,873.

The evidence from other states isn’t any better. Last October, the Maryland Department of Legislative Services prepared a damning report on the state’s Film Production Activity Tax Credit which found that even if every single production filmed in Maryland would have gone elsewhere without the credits, the state would have recouped a mere 6 cents on every dollar awarded in film tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s. The Maryland report concluded that the credit “does not provide much, if any, long-term economic stimulus” and “does not provide any sustainable employment.” It’s hard to disagree.

Subsidizing the lucrative and transitory film industry through the tax code results in economic distortions, pits states against each other in competing for a zero-sum expenditure, and shifts the tax burden disproportionately onto individuals and other businesses to underwrite a favored industry. Baker will face an uphill battle selling his proposal to a skeptical legislature, but his fight is a worthy one. Just don’t expect anyone to make a movie out of it.

Click here for a more detailed explanation of why film incentives don’t grow state economies, from my colleague Liz Malm (more resources here). Previous coverage of Massachusetts here.