Your State Tax Dollars on the Red Carpet

At Pew’s very useful Stateline site, Will Wilson has an article that sent me hunting for my blood pressure meds:

Of the nine film productions up for best picture at Sunday’s Academy Awards, five received financial incentives from state governments. But if you want to find out exactly how much help the films got, only some of the states will come forward with the answer.

This happens to be a real pet peeve of mine. Of all the nefarious corporate subsidies that state governments shower on the un-needy in order to screw each other in a mindless race-to-the-bottom competition, few are as unworthy yet lavish as those offered to the film industry. It’s become a true craze in recent years, as popular with Democratic as with Republican pols, probably because it seems to fall into that public policy netherworld between “economic development” and “tourism promotion,” and also lets elected officials rub elbows with Hollywood celebrities while voters get to jostle for unpaid “extra” work.

As Robert Tannenwald of the Center for Budget and Policy Priorities explained in a 2010 report, state film subsidies tend to produce little in the way of tangible benefits despite unusually large costs (an estimated $1.5 billion in 2010). The subsidies don’t just involve garden-variety tax abatements or technical assistance, either:

States incorporate one of two rare features into their film tax credits — refundability or transferability— that makes them especially generous and therefore costly to sponsoring states. If a producer lacks sufficient tax liability to use all of a refundable film tax credit, the state pays the producer the whole credit anyway, in effect giving the producer an outright cash grant….

Transferable tax credits are also lucrative deals for film producers and in the long run just as costly to the state. Producers can sell such credits to other companies that owe taxes to the state, regardless of their line of business. The sale is usually undertaken with the assistance of the state itself and/or a financial intermediary that packages purchased film tax credits from multiple states to make them more attractive to potential purchasers.

It’s unsurprising, then, that film producers discourage publicity about the actual value of state subsidies, as Wilson notes:

Generally, states will reveal aggregate figures showing how much in the way of incentives they gave the whole industry in a given year. And it is not hard to find out if a particular production got some help from a certain state. What is more shrouded in secrecy is the dollar amount for individual productions. According to Good Jobs First, a watchdog that maintains a database of state economic development subsidies, only one-third of the states that offer film incentives reveal how much they give to individual productions.

Many in the film industry view that information as a trade secret, one that states have no business revealing. Dama Claire, a consultant who works with producers to identify and acquire the best incentives for their films, says states that insist on disclosure could see productions go to states that don’t. “Disclosing the amount of tax credits may be akin to asking about a state tax return, which is privileged,” Claire says.

Uh-huh. But treating taxpayer subsidies as a “trade secret” can also hide some serious funny stuff:

[R]ecent scandals have shown just how film credits can be abused. In Iowa, a state film tax credit program was suspended after the state auditor documented misdeeds by both film producers and the head of the state film office. And just this past December in Massachusetts, movie director Daniel Adams was indicted for allegedly inflating his expenses for two films in order to boost the tax credit award he would receive from the state.

People also went to the hoosegow for film program corruption in Louisiana, one of the states that pioneered lavish film subsidies.

In most cases, film subsidies involve waste more than corruption, but at a time when state governments are in such dire fiscal straits that they are undermining economic recovery by laying off employees, it’s still an ongoing scandal.

So when you watch the Oscars and all the associated glitz, keep in mind your tax dollars may be at work.

Here are the best-picture nominees that received state subsidies (via Wilson’s article):

The Descendants (Hawaii); Extremely Loud & Incredibly Close (New York); The Help (Mississippi); Moneyball (California); and The Tree of Life (Texas). Four other nominees received subsidies from foreign governments. The Artist appears to be the only film that paid its own way.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.