A lot has been said recently about the so-called “Hollywood’ film credit. BMG’s own esteemed ryepower12 has even gone so far as to posit the choice as between “hollywood” and the MBTA. Rather stark that. I had begun to formulate a reply to that post, but decided to table it in an effort to be pickier about the battles…. Now, however, it seems the idea is gaining some measure of traction. This post is an iteration of that earlier, aborted, reply.
Without being strictly convinced that the tax credit itself is particularly a good or a bad idea, there are some aspects of the credit that aren’t discussed that I think, with all my contrarian charm, are elided in favor of the above pictured ‘Bluebird of get the hell off my lawn’… I’d rather like to think we can discuss these things before dismissing the credit out of hand.
First of all, there’s nothing that I know of in the tax credit that limits the tax credit to out-of-staters only: yes, “Hollywood” is the biggest player and probably certain to be a beneficiary of the credit, but there’s nothing stopping any resident of the CommonWealth, or nearby states, from filming here and reaping the benefit of the credit. (I’m looking at you Matt Damon: open a Mass Based production company already… oh, and by the way, I just happen to have an idea for a film set in Boston…) Is anyone doing that? I don’t know. Is the nurturing of a CommonWealth centric film industry a central purpose of the law? Again, I don’t know. But I certainly think it ought to be… There’s a lot of money in celluloid. Maybe that’s not enough of a reason to keep the credit. Fine. But it is a reason to avoid calling it the ‘Hollywood tax credit” and treating it as though it’s for outsiders only. It is, I think, for this very reason that Gov Baker pits the EITC against the film industry: it’s rank class warfare maybe possible by the bitter antagonisms towards Hollywood.
Secondly, Massachusetts already has a thriving tourism industry. From the point of view of dollars and cents, in an economy tourism dollars are some of the best dollars there are: if, as Paul Krugman oft states “your spending is my income and my spending is your income” then somebody who takes their income from one place and spends it on another is, strictly speaking, only adding to the dollars in that other place. It’s not quite free money but it is close: in a CommonWealth where tourism is the third largest industry — and we’re talking between 13 and 16 billion dollars annually — and where a little promotional money is spent with a very big return, anything that gets the images of the CommonWealth out there can only add to that. Maybe a little, maybe a lot. But let’s not pretend this isn’t a part of it. How much more would the Office of Travel and Tourism have to spend to get comparable exposure for the CommonWealth? How many movies are about Boston and/or the CommonWealth that would be filmed elsewhere — substituting some other city for the location — but for the film credit?
This isn’t necessarily a defense of the tax credit. I tend to think that it is, absent a deliberate push to make film a vital component of the CommonWealths economy, overall a wash. As such, tossing the credit will require some funding increases or resource allocation elsewhere. I’m fine with that. It might be better to directly target any nascent film industry in the CommonWealth. And if we want more tourism maybe we should directly appeal for more tourism, rather than hope that tax breaks for movies tickle the travel fancy of moviegoers. I don’t know. Let us discuss it.
It is, however, an appeal to have a better debate on the subject. Simply saying MBTA v Hollywood or Hollywood v EITC, isn’t actually all that much better than giving Charlie Baker another wedge with which to divide us.
Thanks for writing this up Petr – you definitely point to the larger question of what are the values of these sorts of tax credits and how do they impact the Commonwealth?
I’ve always tended to think of tax credits in 4 ways:
1) To reduce tax burdens on those who can least afford to pay taxes (Such as EITC)
2) To influence specific behaviors (Such as credit for buying an electric car)
3) To generate larger tax recaptures for the state
4) As a reward for specific politically connected groups or businesses
To me the film credit should fall under #3 and we should only really keep it if it generates a positive ROI for the state (Recapture via income taxes, property taxes, sales taxes, increased tourism, etc). If the tax credit doesn’t pay for itself and doesn’t hit the first two points, then it becomes #4.
If the film tax credit causes production companies to setup shop here (Corporate taxes from operations, income taxes from in-state employees, property taxes from employees moving here), or causes large expenditures in the local economy during filming (In excess of the tax credit) or can have a measurable impact on tourist, then sure, it can be worthwhile as as way to invest in the state economy. However if the state pays out more that the direct & indirect economic impact of the credit, it’s hardly worth it IMHO.
I’d liken this, on a much smaller scale, to a recent Reuters story on Jeb Bush’s tax credits for biotech firms in Florida. The state, county & local governments spent north of $1.3 Billion luring a few biotech non-profits & research centers to Florida which has only had a $53 Million economic impact as of 2013. That’s a pretty crappy ROI for the state, and they could have spent that $1.3B on many other things. While maybe well intentioned, it ends up simply being a give-away to politically connected biotech companies.
One that worked out rather nicely for big Hollywood films, at that
Step 1)
Convince small filming markets to give you incentives to film there on the basis that it will boost tourism.
Step 2)
Get California to give you similar credits to keep you filming there. (Something they finally did last year.)
Step 3)
Profit! (at taxpayer expense)
The bio-sciences have also been very good at playing this game.
based or filmed in Massachusetts before the film tax credit.
From a post I made a week or so ago:
… That I thought or mused that the CommonWealth was before the implementation of the credit, and would be after, a fallow wasteland of artistic disregard and cinematic barrenness, such was not my intent. I’m sure movies will still be made in the CommonWealth after the credit is binned, just maybe not as many as when the credit was in effect. Vancouver and Seattle, often, are used as stand ins for Boston and if it doesn’t make financial sense to film a Boston themed movie in Boston, they’ll do it. Will some anodyne Boston look-a-like have the same affect upon tourism as actual location shooting in the CommonWealth? Will it present a mis-represention of the CommonWealth to the movie going public, perhaps dampening tourism? Who knows?
Nor does the profile of a movie mean much in this regard. Every body cites RIPD as a total flop that was filmed in Boston. And so it, purportedly, was. Yet, that’s irrelevant. As far as the tax credit is concerned, they spent X amount of production dollars and were give Y in the way of tax credits after being taxed. Whether the movie did any good at all is, from the point of view of taxing production and payroll, is immaterial. It’s probably not good from the point of view of tourism…. but the CommonWealth doesn’t get any vig on the profits, just the production and so neither a tax nor the credit obtains in that regard
I’m also concerned with the very real possibility of a film industry taking root in the CommonWealth and I wonder if ax-ing the credit will produce, instead, a stillborn? I’m not talking about Hollywood bungee-ing in to film for a few weeks, but offices, sets, writers, cameras, etc actually in place, permanently, in the CommonWealth.
If a movie is set in Boston, but filmed in Vancouver, is Vancouver going to see increased tourism because of that?
Elle drives to Cambridge from California and crosses the Tobin Bridge on the way. Even when they are filmed here some movies can’t get it right.
You’d be astonished at the routes some GPS systems offer for getting to Cambridge.
I didn’t object to the credit when it was introduced, but am not really excited by what it has accomplished. I think it is fair to ask whether it deserves to be continued.