Indiana Legislature Overrides Veto of Film Tax Credit

February 19, 2008

From Niki Lohrmann of Tax Analysts:

Indiana Gov. Mitch Daniels (R) on February 15 blasted the General Assembly, and his Republican colleagues especially, for overriding a veto on a film incentive bill (HB 1388) he blocked last year.[…]

The bill authorizes a refundable tax credit for some media production expenses incurred in Indiana. Productions that qualify include feature films, documentaries, music videos, TV shows, and radio advertising.[…]

The Indiana Economic Development Corporation would approve a production’s application for the credit if it is economically viable and will increase economic growth and job creation in Indiana.

But Daniels said legislators wrote a careless bill that gives millions in incentives to businesses that are already in Indiana without having to hire a single new person.

Twenty-nine states offer various levels of incentives for media productions. Indiana’s new incentives will go into effect July 1.

These types of tax incentives are usually bad ideas. We wrote back in 2006:

Because the costs and benefits aren’t estimated and studied—either before or after implementation—tax incentives commonly end up channeling taxpayer dollars directly into the pockets of rent-seeking film companies, generating no corresponding economic benefits on a net basis.

Ultimately, the main beneficiaries are not taxpayers but lawmakers. Every incentive package that attracts a rent-seeking company allows lawmakers to make public announcements taking credit for “new jobs.” Location-based incentives can therefore be thought of as a market transaction between lawmakers and film companies. Lawmakers purchase favorable media coverage for themselves, film companies accept payment for filming in economically unprofitable places, and taxpayers finance the deal. It’s hard to see how that’s good policy.

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