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Pennsylvania Considers Dropping Film Tax Credit; Nebraska Considers Adopting One

2 min readBy: Joseph Bishop-Henchman

We applauded Wisconsin Governor Jim Doyle (D) a few days ago for proposing elimination of the state’s 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. . We noted:

Bribing companies to bring economic activity to your state means one of two things. Either they were going to come anyway and you’re just wasting 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. dollars for no benefit, or they weren’t because something about your state isn’t attractive to business. Picking a handful of industries to shower benefits on undermines the creation of a broad-based welcome mat for all types of business.

The Commonwealth Foundation reports that similar proposal from state Sen. Pat Vance is now under consideration. Pennsylvania spends $75 million per year on the program, which provides a 25% tax credit for films that spend at least 60% of their budget in the state. Vance cites a new state study showing that the program generated just $18 million in new tax revenue.

Aside from film tax credits providing no net benefits and diverting attention from true tax reform, states should be aware that as each state tries to outbid each other for these productions, the costs have risen to the point that a new entrant stands no chance. Michigan is basically paying out cash to films, and many other states have very generous credits. California recently upped the ante on their film credit program, so now you have to contend with the credit and their nice weather.

So for a state like Nebraska, which has no film tax credits but still manages to attract productions, one option is to break the bank trying to wrest a few productions out of states determined to subsidize this industry. Another option is continuing attracting the productions it does, avoid picking winners and losers and complicating the tax code, and otherwise sit back and enjoy movies subsidized by other states’ taxpayers. Alas:

“By shooting in Nebraska you’ll get everything else, the great people and all of that, but you will spend more than shooting in Iowa,” said Robinson.[…]

As for tax incentives, the state is aware of the disparity. “We’re working toward creating a really effective film incentive package to place before the Unicam in 2010,” said Omaha Film Commissioner Kathy Rocco.