We’ve been closely following the fate of 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. incentives for the Netflix-exclusive political drama House of Cards, which films in Maryland. A month ago, we publicized the letter that Media Rights Capital sent to Maryland policymakers recently demanding more tax incentives to stay in the state, and commented that “It’s like Frank Underwood wrote this letter himself,” thanks to the way in which MRC held its possible departure over the state government’s head.
But on Thursday, the story took an unexpected, but perhaps fitting (given the show’s plot), twist. From the Baltimore Sun:
Responding to a threat that the “House of Cards” television series may leave Maryland if it doesn’t get more 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 House of Delegates adopted budget language Thursday requiring the state to seize the production company’s property if it stops filming in the state.
Maryland has seen such subterfuge regarding business relocation before, when the Baltimore Colts fled Maryland under cover of night after the threat of eminent domain.
High taxes and big incentives don’t seem to be working very well in Maryland right now. Indeed, we’ve explained previously that:
- Film production only creates temporary jobs, and companies can leave at the drop of a hat. The Maryland Film Office estimated that House of Cards Season 1 “resulted in local hiring of 2,193 Maryland crew, cast, and extras” but it’s pretty clear based on the letter above that companies can bolt the second they get a better deal. And those jobs aren’t available once filming wraps up.
- Programs do not “pay for themselves” as is often touted. Proponents will argue that increased economic activity will create enough new tax revenue to make up for the initial loss of revenue from the credit. That’s not true. In fact, film tax incentives are a net loss to states, and there are plenty of studies demonstrating this.
- Estimates of economic impact should be taken with a grain of salt. As we noted a few years ago: “[a]dvocates rightly point out that one dollar of film spending trickles through the economy and creates more economic activity. For instance, if a film production spends one dollar on wages for a worker, that worker will take that income and spend it in the economy, creating income for others, and so on…But the fact that film productions impact the broader economy is not unique to this industry.” If those dollars from the State of Maryland weren’t spent on film production, they’d be spent on something else and still cycle through the economy. Those 2,193 employees the Maryland Film Office is touting likely would have happened anyway.
Read more on Maryland here.
Read more on film tax incentives here.
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