Lawmakers are giving the state’s film tax credits a close look as part of a broader review of state tax breaks - scrutiny that might lead to changes as soon as next year.
Tom Cruise and Cameron Diaz stop the traffic on the South Boston waterfront at the set of their latest action-comedy flick. Across town, Ben Affleck pulls double-duty by directing and acting in a bank heist movie.
A science-fiction thriller shot in the Boston area debuts as the nation’s No. 2 movie at the box office. And the developers of a film studio campus in Plymouth announce that they’ve lined up a $550 million construction loan for the massive project.
With this hectic montage of scenes playing out in just the past two weeks, there’s no question Hollywood has arrived in Massachusetts. But will it stay here?
Lawmakers are giving the state’s film tax credits a close look as part of a broader review of state tax breaks - scrutiny that might lead to changes as soon as next year. The review comes on the heels of a brief, unsuccessful attempt at the State House this summer to cap how much of a movie’s budget could be eligible for credits - a move that could have chased away many big budget flicks like the Cruise-Diaz film.
House Speaker Robert DeLeo was noncommittal when I asked him if he would support another effort to water down the tax credits. He said he needed to talk with his chairman on the revenue committee to make sure the program is effective. DeLeo was careful not to sound negative, though, and he conveyed an anecdote about one time earlier this year when he bumped into a number of Massachusetts residents happily at work on the makeshift set of a TV pilot at the State House.
DeLeo seems to be waiting until the revenue committee is done studying the issue before he makes up his mind. An ad hoc revenue subcommittee recently began the elaborate process of analyzing the state’s many tax credits, exemptions and incentives. Like her Beacon Hill boss, Rep. Alice Peisch says she is keeping an open mind on the issue. Peisch, a Democrat from Wellesley and the House vice chairwoman of the revenue committee, says the film industry’s tax incentive program is one small piece of her panel’s wide-ranging review.
Peisch says it’s clear that the tax credits - which first took effect in 2006, and were sweetened in mid-2007 - bring plenty of film activity to the state. But Peisch says her committee still needs to assess whether the tax credits generate enough of an economic benefit to justify the costs. She hopes to have a report done by the end of the year or - at the very latest - in time for next spring’s annual budget debate.
Nick Paleologos, executive director of the Massachusetts Film Office, says he’s less worried about the tax incentives’ fate now that they survived this year’s grueling budget season. Paleologos, who met with Peisch’s subcommittee on Sept. 15 to defend the credits, says he believes legislative leaders are reluctant to tamper with an economic stimulus program that’s actually working. He points out that the state’s 25 percent tax credit on local production spending is more moderate than what’s been adopted in several states - something that should help shield it from criticism.
A Department of Revenue report released in July provides plenty of data for the film industry’s supporters. The state awarded about $166 million in tax credits in the program’s first three years. In return, the credits generated an estimated $302 million in new spending in this state. That’s a conservative estimate that doesn’t include costly salaries for out-of-state stars and production work that probably would have happened anyway (the number exceeds $670 million when all direct spending is included). In 2008 alone, the report says the industry created an estimated 1,800 new full-time jobs - almost evenly split between in-state and out-of-state residents.
IATSE Local 481, a union that represents film workers in New England, has seen its membership grow from 375 in 2005 to about 850 today. Chris O’Donnell, the union’s business manager, says the aggregate amount of money his members earned in 2008 was roughly 10 times what they collectively earned in 2005.
But the tax credits’ critics may enjoy a more receptive audience on Beacon Hill now that state officials are considering another round of budget cuts. Michael Widmer, president of the Massachusetts Taxpayers Foundation, recognizes that the film tax credits spurred job growth. But Widmer says the film industry’s jobs remain just a tiny portion of the state’s overall work force.
Widmer argues that the $100-million-plus a year that the state spends on these credits could be used more effectively in other corners of the economy - such as local aid to cash-strapped cities and towns. It doesn’t help the industry’s case, he says, that the tax credits only return 16 cents in tax revenue to the state’s coffers for every dollar that’s spent.
You can bet that Rep. Steve D’Amico of Seekonk will continue his quest to drop much of the credits on the cutting room floor. D’Amico, who shares Widmer’s frustrations, says he’s pushing a bill that would revive a $7 million-per-picture cap on the credits - a cap that was lifted in 2007, opening the floodgates for production work here.
We certainly aren’t alone in this debate. Politicians from Connecticut to California have reviewed the merits of their film tax credits, and some states have capped their film incentives to address their own budget shortfalls. After several years when lawmakers were clambering to outdo rival states with their incentives, many of them are now scrambling to undo the subsidies.
Massachusetts is still staring at a potential budget crisis, with tax revenues down 10 percent from a year ago in the first three months of the fiscal year. So it’s perfectly understandable that state leaders would want to give a close look at all publicly-funded incentives for every sector of the economy.
But a pullback now would undermine Massachusetts’ leadership in attracting the film industry’s dollars. As other states fold their hands, Hollywood moguls will be looking for the states where the tax incentives remain rock solid.
Winning this race isn’t just about bringing movie stars to our capital city or seeing familiar sites up on the big screen. The real benefit is fostering one of the few industries in our state that is rapidly adding jobs at a time when we need them the most.
Jon Chesto, business editor of The Patriot Ledger, may be reached at email@example.com.