More on Iowa Film Credits and Why Tax Reform is So Difficult

February 4, 2010

Bill Ahern blogged earlier on a bill introduced in the Iowa General Assembly last week would eliminate the state’s $50 million film tax credit program. As Bill notes, the tax credit for movie productions has become a poster child for tax subsidy corruption and abuse. Corruption and abuse aside, film tax credits are a bad use of tax policy. See why here.

The day after the bill was introduced representatives from various film industry organizations showed up at a House Economic Growth Committee hearing to beg lawmakers not to repeal their special tax break. This provides a lesson that helps answer the question of why many tax expenditures are so hard to get rid of. The benefits are concentrated within a relatively small pool of individuals or businesses, in this case mostly the filmmakers, that will fight tooth and nail to keep their carve-outs, while the costs are dispersed among the rest of the taxpayers who individually are not likely to have a large incentive to fight the special interests. Hopefully Iowa’s lawmakers have the rest of the taxpayers in mind and will repeal the film tax credit.

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