The film incentives racket
Published December 28, 2013
by Mitch Kokai, The Locker Room, December 27, 2013.
Still think film incentives make sense for North Carolina, despite all evidence to the contrary? Add this Los Angeles Times report to your reading list.
[Ric] Reitz is one of Hollywood’s new financiers. Just about every major movie filmed on location gets a tax incentive, and Reitz is part of an expanding web of brokers, tax attorneys, financial planners and consultants who help filmmakers exploit the patchwork of state programs to attract film and TV production.
In his case, he takes the tax credits given to Hollywood studios for location filming and sells them to wealthy Georgians looking to shave their tax bills — doctors, pro athletes, seafood suppliers, beer distributors and the like.
“I’ve got a giant state of people who are potential buyers,” he said. “It’s the funniest people who are hiding under stones.”
The trade benefits both sides. The studios get their money more quickly than if they had to wait for a tax refund from the state, and the buyers get a certificate that enables them to cut their state tax bills as much 15%.
About $1.5 billion in film-related tax breaks, rebates and grants were paid out or approved by nearly 40 states last year, according to Times research. That’s up from $2 million a decade ago, when just five states offered incentives, according to the nonprofit Tax Foundation.
Film tax credits have become so integral to the filmmaking process that they often determine not only where but if a movie gets made. Studios factor them into film budgets, and producers use the promise of credits to secure bank loans or private investment capital to hire crews and build sets.
“You just follow the money,” said Ben Affleck, the actor-director who said he would shoot part of his upcoming film “Live by Night” in Georgia. “What happens is that you’re faced with a situation of shooting somewhere you want to shoot, versus shooting somewhere you’d less rather shoot — and you get an extra three weeks of filming. It comes down to the fact that you have X amount of money to make your movie in a business where the margins are really thin.”
The credits and incentives can cover nearly one-third of production costs. In 14 states, there is an added benefit: They can be sold, typically enabling the filmmakers to get their money months sooner than if they had to wait for refunds. States that permit the sale of tax credits, including Georgia and Louisiana, are now among the most popular for location shooting.
December 28, 2013 at 11:23 am
Norm Kelly says:
What's the difference between 'the law of unintended consequences' and just plain bad business decisions? The law of unintended is often more prevalent in government decisions than in private business decisions. Just plain bad business decisions almost always affect governments more than private businesses. When a private business makes a monumentally stupid business decision that costs them millions, I don't necessarily have to participate in the loss. Take TimeWarner for instance. When they chose to buy AOL and lost HUGE, it didn't affect me cuz I'm not a TW customer (that I know of; but i did celebrate). When the state decides to provide incentives to some business and that fails to provide the 'return' that they expected, my back pocket is negatively affected. I have the power to decide if I do business with TW, for instance. I have no choice but to 'do business' with the state. TW does NOT have the ability to take money from me at gunpoint. The state and the feds have this power. I have no choice.
Was it the intent that film tax credits would become a business? I doubt it. But someone is making money by being a broker for my tax dollars? And I'm supposed to believe this is a good thing? I don't begrudge the private business for what they do. I hate that the government believes they should be gambling like this with MY money. Without my consent. TimeWarner (just an example, but a good one) can throw as much money away as they choose. I'm not required to do business with them. There are a number of private businesses that I choose to avoid doing business with. GE, Sears, TW are on my list. I do quite well avoiding giving them any of my money. Do I have that same choice with government agencies that are monopolies? Well, if I had a choice they wouldn't be monopolies, would they?
So, this editorial comes to the same conclusion that I've come to. Most government incentives are wasteful and should be eliminated.
