National Study Questions State Film Credits: RI Responds
Tuesday, December 14, 2010
Rhode Island’s film tax credit has generated hundreds of millions of dollars in economic activity and created at least a thousand jobs. In fact, just eleven days ago, a major press conference at the Statehouse—attended by most major office-holders in Rhode Island—celebrated the financial contributions from the recent filming of “Body of Proof,” a new ABC series that filmed a season’s worth of episodes entirely in Rhode Island.
At a time of increased scrutiny over taxes and spending, a new report by the Center for Budget and Policy Priorities claims the benefits of such programs are not worth the cost, citing direct tax revenues as one of its central measures.
Steve Feinberg, director of the state Film and TV Office, said Rhode Island considers its program a success because it not only generates revenue for the state, but supports existing businesses and theater programs. “We are very proud of the work we’ve done to support our local crew and talent base as well as the small businesses that have been positively affected by the Motion Picture Tax Incentive Program,” Feinberg told GoLocalProv.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTRhode Island’s tax credit differs from others
In 2010, Rhode Island made $15 million available in film tax credits. Some states spent more—like California, where as much as $100 million was available. But on a per capita basis, Rhode Island’s costs more: $14.24 per person versus $2.75 per resident in California, using 2009 U.S. Census data.
But Feinberg said the tax credits are structured differently from state to state, so it may not be fair to compare Rhode Island to a state like California, even on a per capita basis, because there are so many other differences in the programs.
He said Rhode Island only allows a production company to claim a credit on 25 percent of the production funds that are spent in state. So, for example, if a company has a budget of $500,000, but only $450,000 is spent on Rhode Island businesses and workers, then it could only claim a 25 percent credit on the $450,000. That would come out to a tax credit of $112,500. Feinberg said the state also does not exempt production companies from other taxes, like the sales tax.
National report questions benefits
The Center for Budget and Policy Priorities compared film tax credits across the states in its report, concluding that the programs do not generate as much in revenue as they cost, are not an effective job-creation tool, and are not the best way to ensure production companies come to your state.
Ed Mazze, a University of Rhode Island business professor who has studied the tax credits, said the Center’s study is based on the flawed assumption that the credits are supposed to generate their worth—or more—in revenue. “My original premise is that the purpose of tax credits is to create jobs and support existing industries,” Mazze told GoLocalProv.
At the “Body of Proof” press conference, several state leaders came out in full support of the program.
One, Senate President Teresa Paiva Weed, said she had been initially skeptical. “I was one of the skeptics when the film tax credit came out. I was one of the folks that said, ‘How does this work? I’m not sure—will this really work?’” Paiva Weed said. “And I have come through much education from my colleagues over the years to become a real believer, because we now know that it works.”
Do film tax credits cost too much in lost revenue?
From 2005 through 2009, Rhode Island handed out $56.7 million in film tax credits to 46 production companies and received $34.1 million back in income taxes generated by employees at those companies, according to Mazze. (See chart.)
But he says as much revenue was likely generated through other taxes, such as the rooms and meals tax and corporate taxes. Those aren’t measurable, Mazze said, because there are just too many factors to take into account, but they are nonetheless a definite benefit that results from the production companies coming to Rhode Island. (Click here to read his complete study.)
Do film tax credits create jobs?
The Center for Budget and Policy Priorities’ report claims that the best jobs created through film tax credits go to out-of-state workers while the ones that go to residents are temporary and part-time positions. The Center cited examples from other states, like Massachusetts and Michigan, where the jobs created on production sets last just a few days to a few months.
Mazze says his research already accounts for the fact that not every job created in Rhode Island is full-time. His research shows that the tax credits given out between 2005 and 2009 generated the equivalent of 4,184 full-time jobs. Overall, the $56.7 million that went toward the credits in those years yielded a total of approximately $466 million in economic activity. That’s eight dollars of economic benefit for every dollar of the credit, according to Mazze. (See above chart.)
Benefits to school theater programs
Feinberg says there are other benefits the program brings to Rhode Island. He said they tie into theater programs at schools throughout at the state. At the high school level, he said students get to see a major production up close while at the college level students have the opportunities for internships with production companies. Beyond that, he said the growth of the program gives those same students job opportunities when they graduate.
“They get to stay here,” Feinberg said. “They don’t have to bail out of our state.”
Beyond the economics of it all, he says the films made in Rhode Island boost the state’s reputation around the world. “All of this work also showcases our state to an international audience,” Feinberg added. “One example is the motion picture ‘Dan in Real Life.’ When it was released in Europe, the new title was ‘Love at First Sight in Rhode Island’ … Imagine the poster in the center of Paris.”
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