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Film Tax Credits Getting Attention in Some States

1 min readBy: Mark Robyn

There has been some recent movement on 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 in the states, with at least three states making changes to their credit programs. A couple states have cut back. First, recognizing that the government has more important priorities, New Mexico lawmakers passed and the governor signed a bill that caps the available 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 at $50 million per year. $50 milllion is still pretty generous to the film industry, but it is better than no cap at all.

Rhode Island Governor Lincoln Chafee’s proposed budget calls for elimination of the state’s film tax credit which would have paid out an estimated $1.4 million in 2012. The budget has run into opposition, mainly due to provisions that would have balanced the state budget in part by raising taxes by $165 million in 2012. Among other things, the budget would have reduced the general sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rate and expanded the sales tax baseThe tax base is the total amount of income, property, assets, consumption, transactions, or other economic activity subject to taxation by a tax authority. A narrow tax base is non-neutral and inefficient. A broad tax base reduces tax administration costs and allows more revenue to be raised at lower rates. to include some currently untaxed goods and services and some business inputs. It remains to be seen if future iterations of the budget will also eliminate the film tax credit.

On the other hand, Utah has increased their credit rate from 20% to 25%. As we’ve said before, film tax credits are bad policy and can’t deliver on their exaggerated promises. States are locked in an unending arms race of incentives with the real beneficiaries being the film companies. For more on film tax credits see our dedicated page.

Update: Arizona lawmaker and Chairman of the state’s House Ways and Means CommitteeThe Committee on Ways and Means, more commonly referred to as the House Ways and Means Committee, is one of 29 U.S. House of Representative committees and is the chief tax-writing committee in the U.S. The House Ways and Means Committee has jurisdiction over all bills relating to taxes and other revenue generation, as well as spending programs like Social Security, Medicare, and unemployment insurance, among others. recently killed a bill that would have broght the state’s film incentive program back from the dead.