Film Tax Credits Under Fire in the Ocean State
Written by Karsten Hatch | Posted by: JMG
In bad economic times, tax credits can be the first things to go, but is Rhode Island giving a fair shot to the film industry?
Rhode Island’s Governor Donald L. Carcieri is again proposing to end tax credits for the arts, including films that are made in the state. This idea is not new to RI and has previously caused an uproar in the artistic community.
There are two sides being drawn on this issue: the side of the government who say that the proposed move would save the state much needed tax income in a time of national recession. On the opponents’ side are the people of Rhode Island involved in the arts and those who benefit from a strong artistic community in the state, saying that yes, it might save the state some money but that is nothing compared to the revenue brought to Rhode Island by the business directly and indirectly related to filmmaking and other media arts. As an example they look towards Massachusetts, their neighboring state, that has seen a huge influx of business as more and more movies are made in the state.
The tax credit program is still fairly new in New England, and data on its effectiveness is still being collected and analyzed. In Rhode Island it was passed into law in 2006 through the general assembly and states that it provides a “25% motion picture company transferable tax credit” for all Rhode Island spending. It also mandates salaries for people working on the ground, in RI. In addition, the film/TV commercial/video game production must be filmed primarily in the state of Rhode Island and have a minimum budget of $300,000. Almost immediately, Governor Carcieri disagreed with the credit, and now, four years later, the debate rages as to whether or not to end it.
Though tax credits draw business to an area, it is not without its drawbacks. One is a question of how much of a tax credit to give: as more states offer a tax credit on filmmaking, fierce competition has arose. Iowa itself had to suspend its tax credit program after it inflated to 50%. Other states with a more moderate tax credit in place find that it works well in drawing business away from Hollywood and New York. This is seen clearly in Massachusetts who, like Rhode Island, has a 25% tax credit in place and has seen the number of major film productions produced in-state explode from one to 12 in four years.
Rhode Island legislators that want to end the program point out abuses of the credit. This was evident when Hard Luck, a direct-to-DVD movie starring Wesley Snipes and Cybill Shepard, received a $2.65 million credit after the production company stated that it had spent $11 million in the state. It was later revealed that only $1.9 million of the money actually went to Rhode Island vendors.
Other notable abuses of tax credit programs include an incident in Louisiana when the state film commissioner, Mark Smith, plead guilty to accepting bribes, and more recently in Connecticut, state attorney general Richard Blumenthal investigated the possibility of misleading film contracts being sent to a single company in Stamford. Could greater oversight be the answer?
On the other side of the issue, there exist many examples to show that tax credits actually work. Two of Rhode Island’s neighbors, New York and Massachusetts have developed a flourishing film industry. In New York, the first two years of the program saw a distribution of $42.5 million in credits with a $2.45 billion influx of direct economic activity. It has actually stolen productions from Los Angeles, including the popular show Ugly Betty, and has gained new shows including Fringe and the short-lived Life on Mars.
In Massachusetts, while overall state employment has declined, film work has increased. It has been shown that the credits are also responsible in offsetting job losses in construction and transportation. The desire to invest in film can be seen by the proposal to build studios in the state, although at this time, the prospect of this is still questionable.
Additionally, many New England natives who transplanted to Los Angeles for the promise of film work are coming back to New England to live as they find that aside from a lessening of creative competition, there is now enough work in their home area that they can live comfortably.
The bottom line, as drawn by the tax credit’s defenders, is that taxes generate income for the treasury, and tax credits are used to spur economic growth by bringing business into the state where the money is then spent on local businesses such as hotels, food, and transportation.
Though New York and Massachusetts are examples of tax credits performing admirably, there are several states wherein tax credits have not yet yielded stellar results. Some states dramatically increase their credit program in the hopes of luring business into their own states, such as the example of Iowa. Tax credits – and the debate surrounding them – might be here to stay, though the final word falls to the film industry regarding where they would like to stage their productions. Volatile and unpredictable – but such is show business, and it’s America’s second-largest industry for a reason.
More information on Rhode Island’s tax credit can be found at: http://www.film.ri.gov/taxinfo.html
More information on Rhode Island’s tax credit can be found at: http://www.film.ri.gov/taxinfo.html Rhode Island residents! Tell Governor Carcieri that the tax credit works: http://www.governor.ri.gov/contact/. Join the Facebook group Save the Rhode Island Film Tax Credits and see NewEnglandFilm.com Publisher Michele Meek’s photo journal from the recent State House meeting.