About those Hollywood tax credits

For those of you who can’t remember, Gov. Doyle proposed ending the tax credit for film productions that shoot in the state. The ensuing debate was especially interesting because the tax credit was actually Lt. Gov. Barbara Lawton’s “baby” persay. Less than two weeks ago the Joint Finance Committee voted to compromise – the credit was capped at $3 million. Significant? Who knows. Apparently the state paid out over $4 million in tax breaks to the producers of “Public Enemies.”  Do these tax breaks really put Wisconsin ahead of other states in attracting movies? Not really, because practically every other state has equal if not more generous incentives for Hollywood.

“An Associated Press survey found that states competing for projects handed out $1.8 billion in tax breaks and other advantages to the entertainment industry from 2006 through 2008.”

Moreover, it looks as if the tax rebates do not necessarily finance themselves. So says an article by the AP.

“But many economists and policy analysts who have studied the issue independently contend that tax breaks for the TV and movie industry are rarely break-even deals for states, in part because the jobs created are often short-lived. Even the revenue departments in some states would agree.”

The obvious case for the credits is simple – if other states are so generous, then we must be at least equally so or we’ll miss out on the movie profits completely. This is the case the Herald editorial board essentially made. With tax incentives for production companies so widespread, I hate to say it, but Wisconsin offers virtually nothing that a lower-tax state can’t provide. North Carolina appeared to have learned the same lesson the hard way just recently, as Miley Cyrus and her Disney crew decided to abandon the tarheels for Georgia after realizing that the latter had a tax rebate twice as large: 30 percent vs. 15 percent. Granted, Disney movies don’t usually require much specificity when it comes to setting and scenery. More respectable ventures could have a reason to come to Wisconsin.

Conclusion: I don’t know. It really comes down to how much revenue is generated by the movies coming to town. Very simply, if the tax revenue exceeds the tax credit, than the policy is worth it. Moreover, the incentives provided in the updated law make it more likely that money will be spent wisely, on movies that are shot at least 35% in Wisconsin and employ Wisconsin natives.