Blue Mass Group

Reality-based commentary on politics.

Weighing the Cost of Celebrity Salaries

By

In Show Me the Money, Bruce Mohl explores the potential direct and ripple effects of films on the Massachusetts economy:

The Revenue Department estimates it will collect $18.6 million in employee withholding taxes from the films that have come here so far, well short of the $138 million it will cost in tax credits to lure them here. Film industry officials say far more tax revenue will be generated as the movie spending ripples through the economy, but no one knows how much. The other big unknown is how long our credits will remain attractive; other states keep ratcheting up their credits to steal the business away.

And the Mass Budget and Policy Center's Brief on the Film Industry Tax Credit digs deeper into several aspects of the film credit, including the credit's cost, effects on job creation, and how it lines up against other types of credits:

The 25 percent rate is significantly higher than most credits in the state tax code. For example, Massachusetts has an investment tax credit that provides a credit of 3 percent to certain companies that make investments in qualified tangible property. The state also has an Economic Opportunity Area Credit that provides a credit of 5 percent of the cost of property a business invests in within an economic opportunity area.

With a $1.3 billion state deficit, how can we justify subsidizing an industry that has a negative impact on revenue and a minimal impact on job creation? Shouldn't we be spending that money on public structures that have the potential to truly stimulate our state and our people?

 

Photo: Deb Fastino, organizer and co-director of the Coalition for Social Justice

was holding this sign as she greeted Speaker DiMasi in Fall River last week. She is an organizer and co-director of the Coalition for Social Justice, a progressive grassroots movement for social change, making it possible to win legislative and electoral gains that will benefit working families in Massachusetts. 

 Crossposted from [ONE Massachusetts]

Please share widely!
fb-share-icon
Tweet
0

Comments

  1. I for one, would like to pass on this open heart-felt thank you to our Governor.  Thanks!

    <

    p>The film credits are fully transferrable so i’m able to purchase said credits, thereby paying my Mass tax for less than 100%, and then with the excess credits, sell them for a small profit!

    <

    p>So, let’s see.  I saved money, I made a buck or two by selling them, film folks made some cash, stars get bigger payday, the massachusetts country side gets its picture taken.  

    <

    p>It’s win-win-win-win-win, unless of course you’re the state of Mass tax coffer, whose minders haven’t yet figured out that corporate welfare rarely, if ever, fills the government piggie bank, whether it’s welfare for solar, film, life sciences, a new sports stadium….

    • I have read the link to the brief.  For a time, almost no movies were made here.

      <

      p>By making the volume go up, and an activity level increase, it is not at all clear to me that this credit, if clumsy, will not turn out to be beneficial in a big picture sense.

      <

      p>Especially if “that studio” does get built on Cape Cod.  I am willing to place this credit in the “wait and see” category, as well as looking at how Emerson and its students, and others are affected over a 5-10 year period.

      <

      p>To the extent that just “bringing them in” diversifies economic activity in my view, this is positive.

      <

      p>Also, lets see how these film companies behave – will they themselves show appreciation in ways that enrich the Commonwealth of Massachusetts – or just “take the money and run” – lets all watch closely.

      • The studies above estimate that $18.6M in income taxes will be collected as a result of bringing this industry to the state.  If I’m doing the math correctly, isn’t that $18.6M/.053 or $351M in wages that wouldn’t otherwise be earned here? That’s a lot of mortgages paid, necessities purchased, kids sent to college, etc.  The unions that represent workers employed by the film industry certainly come out in favor have seemed in the press to be in favor of the credit.  

        • I think that the problem here from reading about this tax incentive is that is most likely way over generous.  One could argue that point about any subsidy (do you think the Fidelitys et al would fall over in a stuporous delight if the state offered them a 25% saleable tax credit on their expenditures, not just taxes paid?)

          • All of these estimates of what the program “costs” in tax revenue seem to assume that, absent the prgram, everything would have happened exactly the same, except that it would all be taxed.  This sees like an exceedingly dubious assumption– almost to the point of propaganda.

            <

            p>So, if, absent the program, there would have been no filmmaking here, then the “cost” is zero, and may be positive, to the extent that there are payroll taxes on payrolls that would not have otherwise existed.

            <

            p>I guess I live in the insufficient data to decide camp, although I am skeptical of these type programs.  If they wanted to make it easier for businesses in Massachusetts, they could find ways to slash the cost of doing business:  worker’s comp and unemployment.

            • Any subsidy, as long as it generates $1 more than what it costs to provide, can be “proven” as beneficial as it is a net gain.  The problem with that argument is how good of a return on investment is it providing that subsidy, since we live in a world of limited resources.  Certainly the subsidy is generating a ton of new filmmaking in the commonwealth, which is great for the girls at the Inside Track.  However, one of the real problems that plagued film making in MA before had nothing to do with subsidies, but rather the Teamsters Union which essentially was shaking down production companies for lack of a better term.  Not sure how that issue was addressed. Further, the fall of the US dollar (and hence rise of the Canadian dollar) has made the Torontos and Vancouvers less popular in CA, at least for now…

              <

              p>Despite the popular portrayal of liberal Hollywood, the film companies are about the most cutthroat capitalists out there (just ask Art Buchwald about his experiences with Coming to America).  Think that in the enthusiasm to get film business back in MA, we might have gone overboard with the tax credits provided.  Negotiating with stars in your eyes isn’t operating from a position of strength with these guys.

              <

              p>Are there better ways to provide incentives to businesses in MA?  I get nervous about our economy when everyone gets on their high horse about corporate welfare, because contrary to popular belief, this is a little runt of a state size-wise.  If we decide to “end” corporate welfare say on the financial services industry, do you think that the Fidelitys of the world are necessarily tied to Boston?  Not like GM having to move auto plants; they could be up and running in Smithfield or Nashua in a heartbeat.

              • I don’t necessarily disagree with you.

                <

                p>It just seems that referring to this “subsidy” as a “cost,” while technically true, is misleading to the point where it nearly qualifies for “lie” status anyway.

    • whose minders haven’t yet figured out that corporate welfare rarely, if ever, fills the government piggie bank, whether it’s welfare for solar, film, life sciences, a new sports stadium….

      <

      p>Gary, is that true even if we’re in a Prisoner’s Dilemma, where we can assume other states (and nations) WILL do corporate welfare?  Ie, we’d all be best off if we cooperated (nobody offered incentives).  

      <

      p>But since other states are offering perks, and will not cooperate, isn’t in our best interests sometimes to compete with them?  Does that change the calculation?  

      <

      p>I agree with STomV below (helps me avoid the “r”) that in this particular case, probably not (though he interestingly raises the point of keeping Boston in the public eye, which is a reasonable if hard-to-measure benefit).  

      • To start, why should we seek the film business over, say, the manufacturing business and give film a 25% credit, and manufacturing only 3%. And why make film credits fully transferrable and the manufacturing credits nontransferrable?

        <

        p>Because film making is sexy!  That’s why. And maybe the Speaker or Governor will get to actually meet Cate Blanchett.  Solar panels. They’re green but they’re no Cate Blanchett.  If it’s green or sexy let’s bring it here.  Hmmm…She-Hulk.  

        <

        p>I wouldn’t invest in Evergreen Solar, yet as a taxpayer, I’m compelled.  Similarly, I’ve never invested in a Film, yet looks like I have no choice.  She-Hulk, the movie!  I’m there.

        <

        p>Solar panels and Mass film making could be huge successes, or complete flops.  Evergreen, for example, has yet to turn a profit.  

        <

        p>Yet, despite the fact that the film business in Massachusetts is totally a start-up businesss, Politicians are so wise, making those investing decisions for us.  I just hope that if the Red Sox ever decide to move that the Politicians decide to invest in a new stadium to keep them here.  Taxpayer stadium, film credits, solar plant. Same decision.

        <

        p>So what to do?  Invest and try to get film business here or save the money and watch from the entertainment sidelines, as a crew tries to shoot a film about the Boston Tea Party in New Orleans.

        <

        p>”Yeah, ya know …tro da tea ova dere across da haba where all dos little gaters are.”  

        <

        p>BTW, did you know that “Good Will Hunting” and “Fever Pitch” were filmed mainly in Toronto except for the background shots and some of the street scenes?  West Wing is filmed in Toronto also.

        <

        p>Did you know that the Federal Reserve weighed in on the Film Business and concluded that “the film production business stimulates little additional economic activity in other industries.”  Sounds like a casino.

        <

        p>If someone walked up to you and said give me your savings to invest in the Massachusetts Film business, would you?  Seems rather speculative to me.

        <

        p>Back to film credits.  Spend $60 million to save what? If the film business doesn’t generate much anxillary economic activity, why spend the cash?   If the activity can’t stand on its own legs will a tax credit really make a difference.

        <

        p>It’ll make a difference to me!  I can buy them for about 85 cents and sell them for about 93 cents to rich folks who use them for 100 cents.  

        <

        p>But for policy, I say, let film crews go to Louisiana, or NC.  They’re not in LA or NC for the tax credits and they won’t go to Mass simply for the tax credits either. Labor and land are cheaper elsewhere, there’s more variety of cheap outdoor scenes close to metropolitican areas, and the crews can film for 12 months of the year outdoors.
        with no unions and no police details required at the film scene.

        • has actually collapsed due to the devaluation of the dollar v. the Canadian dollar.

          <

          p>One thing I’m trying to figure out, just relying on limited reporting in the Globe/Herald (which involves having to rely on non-numbers people trying to convey items), is that today it appeared that the film industry would receive a tax credit of 25% of what they spent in MA.  If I read that right, that seems to me that if production studio spends $10m in MA as their costs, they get a credit of 2.5m; one would more expect it to be if the studio owed a tax to the Commonwealth, they’d get a 25% credit.  Please someone with greater knowledge illuminate me, but I kind of thought that you get tax credits on taxes that you would otherwise pay, not on what you just spent.  Hell, at that rate we’ll get every film in the world here (of course it’ll probably end up as an example of unintended consequences rivaling Arizona’s tax credit of a few years ago on alternate energy vehicles, that if played out, would have wiped out the state budget – slap a 1 gallon propane tank on that Ford Excursion and receive $10k as a credit).

          <

          p>BTW, can’t help but pass this on WRT government largesse.  Was down in DC a couple of weeks ago for an actuarial conference, and my old boss and I decided to head over to the new Nationals Park to check out the game that night.  Now granted, it was cold, a Monday (and the NCAA championship game to boot), but this was literally the second game played in this taxpayer financed (and even better, since it is DC, we ALL get to pay for this stuff) stadium, but there were only 20,000 people in this place.  Think that cost was over $500m from DC, but as two fans we were talking to said, the team did contribute $400k for the scoreboard (and what a nice scoreboard it was indeed).

          • $611 million, paid for by the DCSEC (D.C. Sports & Entertainment Commission) — so, paid for by D.C.  Attendance was 20,497.

            <

            p>Given that they averaged 24,000 last year and they had a bit of a fire sale in the off season and are picked to be lousy this year (they’re currently 5-15), 20.5k on a cloudy night is not too bad at all.

            <

            p>Should the taxpayers have to pay for the stadium?  I hate it too man.  I like what NYC did — teams pay for the stadiums, the city pays for the infrastructure improvements around the stadiums (including subway alterations, roadworks, landscaping, etc).

            • Not trying to sidetrack off of the film topic, but the holy mantra around baseball, starting with Camden Yards, was to build a new ballpark, and the place would be banged out the first few years as everyone gawked at the new palace that their still lousy team played in.  First game for the Nationals (opening day) was banged out; second game ever drops to 20k.  Not a good trend I’d say.

              <

              p>They haven’t even gotten naming rights on the stadium – given the complete financing by the district, you think that they could at least chase down somebody to throw some cash back at the project.

              • Not a good trend to be sure, but remember that (1) the team is new to the area (5 years), so they don’t exactly have a huge fan base.  Furthermore, they’re in the same division as the Phillies, Mets, and Bravos — so many DC’ers already have a favorite team in the same division.  Combine that with the point that the Nats will be lucky to go 50-112 this year and you can see why folks aren’t showing up in droves.

                <

                p>As for the second bit — it’s the only part they seem to have gotten right!  I hate selling public space to private messaging, ranging from billboards on Boston’s sidewalks to putting private names on public park amenities.  I love that they haven’t sold the naming rights to the publicly owned stadium.  (I have no idea if they tried and failed or simply haven’t tried)

                • being bandied about nowadays for stadium names.  Might make it a little easier to pay off $611m worth of bonds.

                  <

                  p>Course, the whole naming issue does point out one stock tip:  short anyone naming a stadium.  Think you can track the history of tech bubbles w/ the west coast changes.

                  <

                  p>Guess we’ll be hearing about the Oklahoma City Nationals sooner than later.

    • Dear Gary:

      A year ago I was a sad sack just like you, cutting a check to the Department of Revenue on tax day.  Then I heard about the Massachusetts Film Tax Credit.  And now I understand that in the creative economy, it’s not about the taxes you pay, it’s about the taxes you don’t pay.

      Let me explain.  Cecil B. DeMillion Enterprises is a family-run business consisting of myself and my sister and brother-in-law.  We specialize in cinema verite depictions of the Massachusetts urban landscape, including these soon-to-be-classics:

    • Mystic Riverbank® (2007).  What happens when you park your car in the Assembly Square Mall parking lot and point your webcam east for an hour?  Mystic Riverbank® will open your eyes to the fascinating world of seagulls and flotsam.
    • Good Twill Hunting® (2008).  Shot entirely from a pants rack at the Men’s Wearhouse in Quincy, this short subject captures and ebb and flow of a retail establishment on a weekday morning, showcasing the camcorder feature of the Motorola MotoRazr V6M cellphone.

      Without the Massachusetts Film Tax Credit, neither of these important films would have been made.  Here’s how it works.   For each movie, Cecil B. DeMillion Enterprises ponied up $50,000 to cover what the Film Tax Credit people call “production costs.”  In return, we received a $12,500 tax credit  for each movie!  Now, this is not some rinky-dink “tax deduction” or “tax exemption,” where, once the taxes you owe have been reduced to zero, the party’s over.  This is  cold, hard cash sent right to your door by the state of Massachusetts.  The Film Tax Credit is what has enabled us to “grow” the Cecil B. DeMillion Enterprises “brand” into the thriving business it is today.  

      Which brings us to some very exciting news.  We are pleased to announce our latest Film Tax Credit project: “The Cecil B. DeMillion Enterprises Story: Making the Massachusetts Film Tax Credit Work for You.”  This full-length video has everything you need to become a part of the creative economy yourself.  You will learn:  

    • The lingo.  What qualifies as  a “motion picture” (you’d be surprised!). What qualifies as  a “digital media project” (even easier!).
    • How to substantiate your tax credit claim (Some humorous do’s and don’ts from our CFO!)
    • And much, much more!

      Now, rumor has it that “The Cecil B. DeMillion Enterprises Story” is under consideration for showing at the 2008 Woods Hole Film Festival this summer.  But why wait?  Order now – you owe it to yourself and to the creative economy!

  • I wonder: how much has Boston tourism benefited from movies like Good Will Hunting and Fever Pitch?  What about movies like The Departed?  I’m not suggesting that people come to Boston to scope out the scened in the film, but rather that movies help to keep Boston larger in the national spotlight in ways and among segments that the Sox, Bs, Cs, and Pats simply can’t.

    <

    p>I wonder: how much influence, positive or negative, does film making within Massachusetts have over other arts in MA, ranging from theater to busking?

    <

    p>

    <

    p>My instinct is that it’s a bad deal for Massachusetts; that the economic stimulation and the ego gratification don’t justify the tax credits nor the piling on of this race to the bottom of tax rates for everything except physical work done by individuals.

    • The Freedom Trail never gets walked. The USS Constitution, Plymouth Rock, Plymouth Plantation have been a scandalous waste of money.

      <

      p>What we should do is have imrov theatre on Boston Common and jack up the price at MFA. We would realize billions.

      • What we really need is too really ramp up and get another several hundred more 501(C) 3’s in the state.  

        • Not a bad idea actually.

          From Mass Inc 2005 The Massachusetts Nonprofit Sector: An Economic Profile

          This new report shows that Massachusetts nonprofits contribute substantially to the Bay State economy. Our research finds that the nonprofit sector is among the largest in the nation, employing more than 13 percent of the state’s workforce – nearly double the national average. The nonprofit sector employs more people than most industries in Massachusetts as well as the entire public sector.

          The report also reveals that nonprofit employees are highly skilled, with nonprofit workers more likely to hold four-year college degrees and to work as professionals and managers than the workforce as a whole. In recent years, the nonprofit sector has been one of the few bright spots in the state economy, adding more than 33,000 jobs, an increase of 9 percent, during a time of overall employment decline.

          However, these overall findings mask the diversity of the Commonwealth’s nearly 25,000 nonprofits, which range from leading universities and health care institutions to the myriad of small community organizations. Different parts of the nonprofit sector face different challenges. We hope that this report will shed new light on this vital contributor of employment and economic opportunity in the Bay State.

  • wouldn’t ma pretty much have negligible film activity, jobs, money spent by the film industry, and film industry based tax dollars? It’s a question of something versus nothing, and I can’t imagine what the point of fighting it could be.

    • There’s only room for so many Hollywoods and New Yorks. Film tax credits or no film tax credits, we’re not going to become the next Mecca for Big Screen Audiences. The things that bring movies here (and we do get our fair share) are the locations and history, which we have in abundance, not tax credits. Tax credits are only valuable if they do one thing: bring enough new revenue to this state to offset the expenses of the tax credits. It doesn’t take an expert to be able to tell this tax credit bill doesn’t accomplish that at all.

      <

      p>We may not be able to be a Mecca of the film industry, but it’s not as if we don’t have our own industries that ARE world caliber: finance, biotech, hospitals and colleges. We could be nurturing those sectors far more than we already do. Let’s take colleges, for instance. I’ve seen reports that say for every 1 dollar invested in public higher education, there’s 3 dollar return (which, btw, is the exact opposite of the film tax credit – for every 3 dollars we’ll spend, we’ll get one back).

      <

      p>Why is this important? Our public colleges in this country are among the least publicly funded across the country – among the bottom two per capita. They’re still high caliber centers of learning, but we could make the UMASS system rival the Ivy leagues – as the entire University of California system does – if we were willing to even give per capita funding equal to  the top 15-20 schools, because many of our UMASS schools are already excellent, as I already mentioned. UMASS Worcester, for example, is one of the most difficult med schools to get into in the country if you’re an out-of-state student and it’s no wonder that one of the school’s professors was awarded the most recent Nobel prize. I’m not opposed to giving incentives for the film industry to create even more projects here than they already do, but a) not at the cost of our state’s bread and butter and b) only in ways that make fiscal sense.  

      • but the claim that

        the entire University of California system … rival(s) the Ivy leagues

        <

        p>is just ludicrous.  Firstly, there’s two CA systems — the UC system and the Cal State system.  It’s true that UC Berkeley and UCLA are “hella-good” but the whole system?  UC Riverside?  UC San Francisco?  UC Santa Barbara?  UC Merced?  They’re fine schools, but to say that they collectively rival the Ivy League is nonsense.

        • Yes, “the system” rivals the Ivy Leagues… they have 36,000 students, collectively, at UCLA, and another 33,000 at Berkeley. I’m not as ‘up’ on the other schools in the system, but I’m sure many of them have specific programs that rival Ivy Leagues as well, but I’m done nitpicking myself. The point is that they’re amazing institutions that DO rival Ivy Leagues. If you want to argue the point further, please look up the definition of rival first: I’m not saying they’re better, or that they’re worse – they are different in scope and purposes.

      • current filmmakers who are already here will pay less than they normally would, which could result in a net loss situation. I hadn’t thought of it that way. Not sure what the “errrr” added to your comment, though.

        • and, yes, that is the gist of my comment. The amount of movies it brings, beyond what Massachusetts normally gets, won’t do anything to justify the added cost to this state in creating the tax credit. It’s mostly a tax credit to serve the work that’s already being done in the state, not something that will create enough new economic growth to justify the costs.

  • Sooo what you are advocating is that we reduce or eliminate all incentives for any business that wants to come here.

    <

    p>We should increase taxes and use that tax money toward state spending to give our economy a big boost.

    <

    p>Your serious?

    • the overall tax rate which is lower than average, the strong local economy, the citizens with higher wealth and income and money to spend.

      <

      p>How about if we raise the tax rate for all businesses to 30%, and then offer them all “incentives” so that they’ll end up paying whatever they’re paying now?  Then, they’d all have huge incentives!

  • that this is a bad deal for Massachusetts, IMO. I did write about it not too long ago on my blog, when Mass Budget did their initial report. From what I’ve read in other areas, for every 3 dollars we invest like this (in the current set up), Massachusetts gets one dollar. Eeek..

    <

    p>Contrast that to funding for higher ed: for every 1 dollar the state invests in public higher ed, the state gets a 3 dollar return.

    <

    p>That said, I’m not against giving film companies incentives to come to Massachusetts – beyond our landscape and historical towns. Yet, I’m not sure if giving away more money will really make that much difference beyond the two aspects I’ve already listed. In other words, the sum of new money we’re likely to get from the film industry is going to be paltry.

    <

    p>If we want to do this in a sensible manner – i.e. not corporate welfare – then I think that’s great. Perhaps a solid tax deduction would be appropriate, which would be especially important because in order to get a tax deduction, you’d actually have to pay taxes toward the Commonwealth of Massachusetts – the current film tax credit law doesn’t even require that!  

  • got an email from a friend who giave me permission to post this

    <

    p>Oy vey is mir, what a mess.  I just found out that Alaska passed a similar bill with fully-transferable credits.  Guess where I’m shooting next week. Thanks for educating me on the fact that the tax credit we’ve benefited from drains revenues that could have been spent on all the public structures that protect the environment that we care so much about.

    <

    p>Nonetheless, from what I hear from my filmmaking friends, this is the busiest season they have ever had.  Everyone is working on a variety of projects, especially re-enactments for history documentaries.  We are already working in the state so it doesn’t bring us here, but many outside companies do come here because of a variety of factors including tax credits.

    <

    p>We work on small margins and the tax credits can make or break a project.  Perhaps if you are counting only beans you can make a case against the credits but it seems there are many intangibles, from keeping people employed to reputation to building skills for crew members.  Naturally it’s a race to the bottom, but until every state has equal tax incentives (which means they will no longer be necessary) it’s a good idea to stay in the competition.  BTW, the tax credits system is an incentive for us to spend as much money as possible in Massachusetts rather than in New York. Maybe the solution is for the Feds to offer a tax credit for any production within the US and let the states keep the tax dollars.  Then we would keep film production in the US instead of Canada and Mexico.  

    • Archives