Louisiana Seduces Filmmakers With Tax Breaks
ALEX COHEN, host:
Since retail sales taxes often aren't enough to fund state budgets, some places have been trying something else - reaching out to Hollywood. States like Massachusetts, New Mexico, and Michigan are offering financial incentives to studios if they shoot their movies there. But these incentive programs don't always work out as planned.
We'll hear first from Greg Albrecht. He's the chief economist for the legislature in Louisiana, where they recently invested $27 million in the upcoming Brad Pitt film, "The Curious Case of Benjamin Button." He explained how things work in his state.
Mr. GREG ALBRECHT Chief Economist, Legislative Fiscal Office, Louisiana): If you're a film production company, you come here. You shoot your film here, your movie, your commercial. For spending that you do in Louisiana, you are eligible for 25 percent tax credit of those expenditures.
COHEN: And I assume that part of the motivation here is that then, these film companies are staying at hotels in Louisiana, eating at restaurants there?
Mr. ALBRECHT: Correct, correct.
COHEN: So, you're making money?
Mr. ALBRECHT: Employing people and hiring people, you know, on set as well as the indirect effects, you know, for like, say, staying in the hotels, eating in restaurants, hiring - we've got little companies now that's springing up that supply extras. Just all the things that support a film production shooting.
COHEN: Do you have any sense of how much Louisiana gets on that investment? How much do you spend for every dollar you get back?
Mr. ALBRECHT: For the state government, we are giving up roughly $100 million a year of tax credits that people are claiming against their losing a tax liability. So that's an actual, you know, direct revenue loss. We are getting back, in terms of state tax revenue, probably somewhere in the neighborhood of $25 million dollars a year, maybe even not that much. So it's roughly a four to one loss ratio.
COHEN: That seems like a pretty big loss ratio. Why do it?
Mr. ALBRECHT: We like the film industry. It's a clean industry. We're trying to build an industry. Many people here would look at it as an investment. You have to take some losses while you build up your employment skill sets, depth and breadth of your employment base.
COHEN: These are pretty tight financial times right now. You would think that the people living in Louisiana would be a little bit worried about putting in that kind of investment when you're not seeing as much of a return yet.
Mr. ALBRECHT: Well, in Louisiana, there hasn't been tight financial times for a number of years. We've been doing quite well. In the post Katrina and Rita hurricane environment, we've had quite a bit of a boom here, spending boom, reconstruction boom, federal money, insurance money has been in here, and we've actually been running surpluses. And this hasn't been something that we've looked at as a big drain in a tightening budget environment. Now, we may be thinking a little more along those lines in the coming months.
COHEN: I'm sure, if you're a waitress in Louisiana or you're a manager of a hotel or a want to be production assistant, this all looks very good to you, but there's plenty of industries that aren't necessarily going to get helped out by more film production. What are you doing to help out those sectors of the economy?
Mr. ALBRECHT: Well, this is just one of many programs and incentives and subsidies that we grant to a wide variety of private sector industries. I mean, we have a variety of programs, every state does. It's not just film.
COHEN: Greg Albrecht of Louisiana's legislative fiscal office. For a different point of view on film incentive programs, I spoke earlier with Michigan State Senator Mike Bishop. In Michigan, they offer a 40 percent tax credit to anyone who films there, but Mr. Bishop says some are wondering if local filmmaking is worth the price?
State Senator MIKE BISHOP (Republican, Michigan): The concern that we have is that, when we supported the incentives, the administration here in Michigan in the treasury didn't provide us with accurate information with regard to the liability of the state with these credits. It now appears that a $50 million dollar liability with the credits is going to be somewhere around $100 million in the first year, and up and over $200 hundred million in the years thereafter.
All of us support the industry. We're incentivizing a part of our economy that we believe is necessary for the future of Michigan given the fact that we can't rely on the auto industry for the years to come. But we recognize the limitations, and we have to do what we have to do to ensure that our exposure is not such that we run out of revenues.
COHEN: And my understanding is that Michigan recently moved to cap the film rebate at no more than 50 million a year. Is that correct?
State Senator BISHOP: There was a move to do that. There wasn't the support to do that, and the reason that there wasn't upport is because members want to see what the liability is for the first year. We want to get a gauge on where we stand, and there is concern that our exposure is going to be astronomical in the future, but we're holding onto hope that this investment is permanent here in Michigan, and that perhaps these jobs will be permanent, as well.
COHEN: Mike Bishop is Michigan's Senate majority leader.