FILM TAX CREDIT FICTION AND FILM TAX CREDIT FACT

Posted January 28, 2010

Here is a brief outline of the chief film tax credit fiction and the actual facts that the numbers bear out.

FICTION: Massachusetts residents are paying to subsidize Hollywood actors.

FACT: People who work on television and films in Massachusetts—even the biggest stars—do not get any tax break. Instead, they are required to pay 100% of all Massachusetts taxes due on their salaries before the production company that hired them is eligible to receive a film tax credit.

FICTION: Big television and movie stars take the money they earn here and spend it back in California.

FACT: In addition to paying 100% of their taxes on the work they do in Massachusetts, the tax checks of actors will keep coming into the state coffers for years to come, since they must pay on all the residual income they earn for the television shows and films they make here.

FICTION: The public doesn’t support the film tax credit.

FACT: Support for the tax credit cuts across party lines. According to a recent Suffolk University/Channel 7 survey, 64% of voters—a comfortable majority—support the film tax credit.

FICTION: The state writes out a check to producers for a quarter of what they spent making their television show or movie.

FACT: In order to get that 25 cents, the producer had to a) spend a dollar in Massachusetts and, b) pay the relevant Massachusetts taxes on that dollar. Additionally, the increased spending stimulated by that first dollar generated substantial Massachusetts tax payments. BUT—according to the state’s Department of Revenue itself—from 2006 to 2009, Massachusetts taxpayers did not pay a quarter in the end. Instead, according to DOR, for every dollar a Hollywood producer spent in Massachusetts, you and I have paid a dime as an incentive to bring that business here. Either way, according to the best-certified numbers available, the cost amounts to pennies on the dollar.

FICTION: States across the country—including Massachusetts—are in a “race to the bottom” when they rely on tax credits.

FACT: Other states have created exorbitant credits. Iowa, which had a 50% credit in place, was actually forced to suspend its program. Massachusetts, on the other hand, has created a modest, middle-of-the road credit of 25% of the cost of a film’s production in Massachusetts. This credit has ramped up film production from one major film in 2005 (before the credit was enacted) to 12 films in 2009, the fourth year of the credit, an increase of 1200% in the heart of a recession.

FICTION: For every dollar Massachusetts has spent on film subsidies, only 16 cents came back to the state in new tax revenues, a loss of 84 cents on the dollar.

FACT: Tax credits are not taxes! Taxes are enacted to generate revenue for the state treasury. Tax credits are created to generate economic growth, which is exactly what the credit has done and continues to do tremendously well. Without the film tax credit, none of this economic growth would have occurred.

FICTION: The moment we end these subsidies, the producers are off on a plane to the next “sucker state” offering more generous subsidies.

FACT: If that were true, why is Massachusetts, with a 25% credit, prospering while other states with
much more generous subsidies (such as Iowa, at 50%) are faltering or failing?

FICTION: As time goes on, the money we’re spending on the film tax credit is going to turn out to be good for the Massachusetts economy.

FACT: WRONG! The film credit is already producing hundreds of millions of dollars in new direct spending in Massachusetts and thousands of Massachusetts jobs. Most other economic sectors have seen job rates decline over the last decade.

The Massachusetts Film Credit.
Proven Economic Growth. Real Results.

FILM TAX CREDIT FICTION AND FILM TAX CREDIT FACT

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