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Special Report
Losing It at Subsidizing Movies
Republicans of all people want to bribe movie makers to make movies in their state.
Two Colorado Republican legislators, State Senator Nancy Spence and State Representative Tom Massey, are sponsoring HB 11-1207, which would impose a 10-cent per ticket tax fee on movie tickets in Colorado, with the money to be used to incentivize/bribe movie production companies to make films in the state.
The details of the incentives/bribes were laid out in a bill in last year’s legislative session, HB 10-1180, which Massey and Spence also sponsored, essentially a gift from Coloradoans to cover 10% of the film’s spending in Colorado, including up to $3 million for any one employee or contractor, as long as at least 25% of the film production’s work force used in Colorado is made up of Colorado residents.
It doesn’t matter that the movie business is “cool,” or that other states are getting more movies made on their soil by offering various incentives/bribes ranging from “transferable tax credits,” to rebates that sound like the latest Groupon (make a movie, pay no sales or hotel tax!), to New Mexico even offering “a 0% loan, with backend participation in lieu of interest.” It matters that this is the worst sort of corporate welfare and exactly the sort of thing Republicans should oppose tooth and nail.
Perhaps Senator Spence didn’t notice, but of the 14 other State Senate sponsors of HB 10-1180, only two were Republicans — and one, Al White, is Colorado’s prototypical RINO. So here she comes, playing a game that we usually expect from Democrats, supporting a tax increase under the guise of a “fee” in order to avoid the headache of allowing voters to decide on a tax hike as required under our Taxpayer Bill of Rights (TABOR).
Perhaps Spence and Massey didn’t notice, but a new study by the Center on Budget and Policy Priorities concludes that state film subsidies offer “Not Much Bang for Too Many Bucks.” The study makes a few key points:
• Since 43 states have film subsidy programs, “no state can ‘win’ the film subsidy war.”
• Subsidies cost states more than they generate in revenue, not least because they “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.” States “must therefore cut spending or raise revenues elsewhere.”
• Because most film production talent is in people who live in Los Angeles and New York, “the best jobs go to non-residents,” leaving for in-state hires “spotty, part-time, and relatively low-paying work that is unlikely to build the foundations of strong economic development in the long term.”
If Spence and Massey had done a little homework, they might have found the latest report by the State of Massachusetts on the impact of its Film Industry Tax Incentives. Some lowlights:
• “In 2009, the cost to the state per Massachusetts resident job created was $324,838…. For the period 2006 to 2009 the cost per Massachusetts resident job created was $133,055.”
• From 2006-2009, the state took in 14 cents of revenue for each $1 of tax credit generated and the total cost to the state was $224 million.
• Supporting the point made by the CBPP study, from 2006-2009, more than twice as much of the film making-related spending which the state’s tax subsidy applied to went to non-Massachusetts residents and business than to in-state residents and businesses.
Perhaps the most incredible outcome from Massachusetts, and one that should keep all legislators, but especially Republicans, from supporting film industry tax subsidies is that the program has compelled the state to reduce spending on other areas, presumably including health, education, and safety, by over $135 million in order to offset the film subsidies’ net cost to the state and allow the state to maintain a balanced budget.
And finally, perhaps Spence and Massey didn’t notice that quite a few states, including the film subsidy pioneer New Mexico, have or will soon curtail their film subsidy programs. In her recent State of the State address, New Mexico Governor Susana Martinez called for “reducing the state’s film subsidy from 25% to 15%,” noting that:
This has been incorrectly referred to as a tax credit. It has nothing to do with taxes. The way it works is when a film is made in the state, New Mexico taxpayers cover 25% of the costs. It’s a simple and straight-forward subsidy — 25 cents on the dollar. And it’s been taken advantage of…. One film company spent $100,000 chartering an actor’s private jet and New Mexico taxpayers paid $25,000 of it.
About the Author
Ross Kaminsky is a self-employed trader and investor and is a senior fellow of the Heartland Institute. He is the host of The Ross Kaminsky Show on Denver’s NewsRadio 850 KOA at 11 AM on most Sundays. You can reach Ross by e-mail at rossputin(at)rossputin(dot)com.
Letter to the Editor View all comments (27) | Leave a comment
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Bill Hussein O'Stalin| 2.9.11 @ 6:53AM
Who can blame them?
The elites in this country feel the public are sheep to be shorned. All they have to is look at the U.S. Congress to see how they screw the public each and every day.
At least in Colorado's case the subsidy is small.
Just the ethanol industry mandates alone cost the public billions. Billions they could be spending on other pursuits.
But both parties insist the ethanol mafia be given license to operate unhindered and the public be damned.
It's not simply a Democratic problem anymore.
Just look at the Republicans and their call for the 32 billion in cuts. It's insulting to pretend they are not in on the game now, the game of the ruling class.
I believe the next election cycle will start a process of wholesale vetting in both parties until the public gets what they want and see some responsibility inside the beltway.
In the meantime the citizens of Colorado got their shearing cheep.
Silver Streake| 2.9.11 @ 9:19AM
Just the ethanol industry mandates alone cost the public billions. Billions they could be spending on other pursuits.
"Billions they could be returning to the taxpayers for them to spend and stimulate the economy."
There - fixed that for you.
Occam's Tool| 2.9.11 @ 10:30AM
Concur. Or, in other worthwhile ways, such as making fuel air bombs that can take out bunkers.
Appleby| 2.9.11 @ 7:09AM
I have not seen evidence that any 2011 movie is going to be worth seeing; so taxing movie tickets(which are already too expensive, even at senior rate) will not affect me.
Sticking the tax on the actual tickets is a good idea, as it allows the people to vote on whether its worth it or not.
MoeBlotz| 2.9.11 @ 8:44AM
Fruitcake leftists want taxpayer dollars to subsidise crap movies attacking our values. Colorado residents deserve their user fee for electing the @(#*$&%}! elite rulers who forgot they work for somebody. Maybe the movie patrons should save their pennies and spend on something else,like an NFL game.
Denver Todd| 2.9.11 @ 8:56AM
What about other subsidies, like the ones we pay to encourage Wal Mart to build a store in a particular place? What about other "fees," like the ones we pay to subsidize a builder to erect a shopping center? There is a little sign by the register that says it "isn't a tax, but a fee that becomes part of the retail price of a product." When is a fee not a tax? When it is in Colorado.
Ross Kaminsky | 2.9.11 @ 9:34AM
Todd,
You're absolutely right, but that's a broader topic I really didn't want to try to get into in a short article. Also, I'm hoping that the specific focus on this one issue will cause those few Republicans who were thinking of supporting it to change their minds.
Occam's Tool| 2.9.11 @ 10:31AM
Totally agree with you on this one, Ross---lived in LA for 5 years and never saw movie producers going hungry.
hardcard| 2.9.11 @ 9:28AM
Great idea. Subsidise the movie industry, m.moore, r.reiner, s. speilberg, m.scorcese, the weinsteins, r.howard, to name a few anti-amerikkan commie / progs, let g. soros , and bloomberg subsidise them. Not the taxpayers!!!
Irish22| 2.10.11 @ 2:12PM
Exactly as planned!!! Dumbass Repubs vote for stuff that helps the lefties . . .
What do I have to do, drive to Colorado and personally kick these people in the ass?????
mames| 2.9.11 @ 9:50AM
I love movies and am willing to pay in a free market to view them - no subsidies for any specific industry.
wolflen| 2.9.11 @ 2:02PM
seems hollywood accounting resembles government accounting..
takes hundreds of millions to produce a movie...the actors directors producers all make millions ... the boxoffice reports billions in sales...and the movie records a "loss"...and then the movie comes out as a sequel "Record Loss 2-the Final Revenge"
tens of billions are spent on education health & welfare all of which are never enough and record poor results by politicians that spend millions to get elected to an office that only pays one a small percent of that amount and the state they represent is recording "deficit" levels higher each year...yet manage to raise taxes and run for re-election..with the tag line "....and this time I mean it..Part 3."
Pat| 2.9.11 @ 3:28PM
Wolfen: good comments, a proper balance of irony and cynicism. But the “creating new industries” ripoff isn’t confined to movie making alone. Since Al Capone’s time, or probably earlier, local governments have tirelessly searched for ways to benefit a special interest like Capone to the detriment of the taxpayers. Bribing aldermen in Chicago, one of the crudest methods, morphed into more subtle forms of government swindles culminating in the current “new industry building” rackets at the city and state level.
Here in California, we’re pioneers at taking your money and giving it to someone else under the guise of building a new and exciting industry. The Great Stem Cell Swindle, for example, was a teaching moment in special interest subsidies. Our state’s two leading scientists, Nancy Reagan and Michael J. Fox, convinced voters to cough up 3 billion dollars to benefit our local special interests disguised as “saving lives by curing disease with embryonic stem cells”. To date, no one has been cured and our politicians assure Californians they deeply regret that fact – in effect, sorry you died before we found the cure.
At the yearly “Scam the Voters Symposium” held at Pebble Beach, our politicians explain to attendees from other states how government can help the special interests without infuriating the taxpayers. First, you need an attention grabbing issue to fool the voters – many things work – we’ll save your life with a miracle cure, we’ll get your daughter a part in the forthcoming movie, we’ll build cars which combat global warming. But, and this is key, you taxpayers have to give us the money before we can do anything.
Next, you setup a seemingly legitimate mechanism for funneling the money to the special interests. Here in California, we have a committee of distinguished academics and businessmen who decide who gets the 3 billion for “stem cell research” – and the politicians alone decide who will serve on the committee. When the academics want 50 million to fund their Berkeley research projects, they recuse themselves and the businessmen kindly vote them the money. The academics return the favor when the business interests need a 60 million subsidy to fund their private research. It works efficiently and like a Swiss movement watch, but the 3 billion will run out eventually and something new will have to replace it. There’s no accountability and trying to find out what happened to the money already given away is almost impossible – the usual response to queries is “why do you want to know?”
Finally, to keep the scam rolling, you need to periodically remind the voters what “good” you’re doing for them. So, tell the voters about the latest Sigourney Weaver film they made in Michigan or announce California scientists are on the verge of a spectacular breakthrough with stem cells. It’s a win-win deal, the special interests are deliriously happy, the voters can congratulate themselves on their excellent foresight.
lmn| 2.9.11 @ 5:48PM
If it was just movies and stem cells it wouldn't amount to much but those are small change compared to the billions of governmetn largesse funneled into the coal and oil industries.
Shamus| 2.9.11 @ 3:53PM
Heck, make it a $5 per ticket fee. If you're willing to part with your money to watch Hollywood films then you deserve to pay up
PattyMor| 2.9.11 @ 4:16PM
Well I stopped going to movies because I didn't want to watch the crap coming out of Hollyweird and fund the marxists/communists with my dime.
But these subsidies are all versions of industrial policy. Just give the pols the money and they will "create" jobs. Its similar to the jobs saved or created in the giant porkulus (stimulus) bill. Then Obamster tell us there are no shovel ready jobs.
It really doesn't matter whether its "affordable housing", enterprise zones, high speed trains, or tax credits. All centralized, industrial policies. It just tells you, taxes are too high. Oh, and the Communists would be sooo proud as central planing has worked so well for them.
Parker M.| 2.9.11 @ 5:30PM
The state of North Carolina grovels before the Hollywood film flimflammers. And the oh-so-cool filmmakers laugh all the way to the bank.
michael gonyea| 2.9.11 @ 6:06PM
Figures lie and liars figure. There is no definitve study on the value of film tax credits. There are two many variables, tangible and untangible to make reliable conclusions...especially blanket ones that cross state lines. Each state needs to do its own analysis, considering the short term and long, and place its own bet.
http://www.associatedcontent.c.....html?cat=3
Ross Kaminsky | 2.9.11 @ 7:50PM
Michael,
Even if an "analysis" showed some net benefit from the subsidy (which I believe is essentially impossible), that would still not make it OK for government to do.
michael gonyea| 2.11.11 @ 8:22PM
Ross-
I respect the purity of your opinion, but the reality is that governments, national, state and local, do it every day. If Occum has his razor handy, I'd be pleased to know that mine is not the simplest answer to this question.
michael gonyea| 2.11.11 @ 8:35PM
Occam. Sorry. No disrespect intended.
matthew s harrison| 2.10.11 @ 1:43AM
As a 30+ year film biz guy-I can tell you a few things about this subject-some that you will see make sense-and some that will piss you off!
1) By offering incentives, states like Illinois have drawn huge movie business to Chicago-and pumped a few hundred million into the local economy-primarily in Chicago. This has been a boon for some-and loss of biz for others. The 22+% hotel taxes for instance are a boon to Chicago and Cook county when movies come to town-but the state turns around and gives the producers 40% or so of what they spent on Illinois residents(contractors) what they rented in Illinois, (gear), etc....that said-it is in one pocket and out the other.
Many local businesses are hurt when the location shoots are done, but are partly compensated by either renting their space to the producers to shoot, or by the city film office for "business lost"...which is more money out of the taxpayers' pockets. All of this usually comes out in the wash-and between Chicago and Detroit-they are needed revenue for business owners, the city, county, and state too-albeit a lot of back scratching, and a lot of union tough guys squeezing the producers for as much as they can, etc.
The really angering part of it is this: the producers turn around and sell their tax chits to the highest bidder-most of the time through one or two companies that specialize in moving those tax incentives for them. For 5% of the total sale, they will match up your incentive with the blue chip company who needs a tax break-and voila-the producers get 40% of their spend in that state back in cash-and a blue chip gets a giant tax return. This wouldn't bother me so much, but those companies are then not having to pay taxes on their Illinois business. What this means to Illinois(in our case) is that the state not only gives away all that money, but they also lose a huge amount of tax income from companies they would normally get money from come April (or whenever their fiscal quarter ends) and the taxpayers in Illinois see their personal income tax rise, see state, county, and city taxes for sales, and otherwise go through the roof, to subsidize the bribes paid to producers.
The politicians think they are doing a big favor for us-but in the end, we get it in the end. Looks good on paper, and they always find a way to talk it up-but it is still pushing losses around from one balance sheet to another-and the taxpayer, as always is the loser. The producers can make a 75 million dollar movie for 50 mil-and by the time they wrap it and are ready to market it-they have their global marketing cost paid by the taxpayers. So-the short term quick fix feels good-but each time the state houses vote on tax increases, we feel it even more.
Fear not-the worse the economy gets-the less movies will be shot on location-and the less opportunity hollywood will have to make movies with the money you pay in taxes!
And don't forget-in the stimulus, barry gave north of 200 million to hollywood to make movies!
CTBC Director | 2.10.11 @ 11:06AM
Apparently, some folks still haven’t gotten the memo…
The mania to circumvent the Colorado Constitution and avoid seeking voter approval of tax increases by calling them “fees” is apparently not an affliction restricted to the Democrat party alone.
Legislators of both parties swear an oath to ’support and uphold’ the Constitution - which includes that pesky Article X, Section 20. Like the executive and (especially) judicial branches, they don’t get to pick and choose which parts of the Constitution to support or ignore without violating their oath of office.
This unconstitutional tax increase must be repudiated by GOP leadership as well as the Citizens of the state.
http://www.clearthebenchcolora.....-near-you/
Christian Louboutin | 6.23.11 @ 5:38AM
Because most film production talent is in people who live in Los Angeles and New York, "the best jobs go to non-residents," leaving for in-state hires "spotty, part-time, and relatively low-paying work that is unlikely to build the foundations of strong economic development in the long term."
Reebok | 8.11.11 @ 4:01AM
is good
العاب | 4.11.12 @ 4:35PM
thank you