Two Louisiana lawmakers plan to offer a bill to reform the state’s $251 million film tax credit program
The bill, which will be introduced by state Rep. Julie Stokes (R-Kenner) and state Sen. J. P. Morrell (D-New Orleans), would place a cap on the value of tax credits given to film production studios in return for producing television shows and movies in the state.
‘Recruiting Specific Businesses’
Kevin Kane, president of the Pelican Institute for Public Policy, questions the efficacy of using film tax credits to entice production companies to film in Louisiana.
“I tend to be skeptical of the idea of government recruiting specific businesses and offering inducements to specific industries to try to bring them to their state,” he said. “At the same time, I’d call myself something of a realist, in that it’s just inevitable that states are going to engage in some of these games.”
‘Don’t Work As Advertised’
Mercatus Center at George Mason University Senior Research Fellow Matthew Mitchell says film tax credits cause more problems than they solve.
“The first fundamental problem is that they just don’t work. States usually do them with the idea that they’ll get back more money than they put into it, that they’ll have a high rate of return,” he said. “Most studies suggest that they lose more money than they bring back in. They just don’t work as advertised.”
Mitchell says film tax credits result in film companies receiving more money from government than they inject into local and state economies.
“Basically, what you would want is to make sure that the ratio of revenue gained, per dollar given out, is more than one-to-one. A review of 10 different state subsidies found that only two of them, in New Mexico and New York, had a rate of return in excess of one,” he said.
“In Louisiana, one study found that every dollar that’s given out in some subsidies returns only 13 cents to the state. Another one said every dollar given out returned only eight cents to the state,” Mitchell said.
Suggested Alternatives
Mitchell says Louisiana should consider improving its business climate for all businesses, not just some.
“A better solution is to improve the overall business environment,” he said. “They should make the permitting process easier and make sure there aren’t burdensome licenses or zoning rules that make it difficult to start a business there.”
Mitchell says broadening the tax base and lowering tax rates would have a greater impact on the state’s economy.
“The second thing is to improve the overall tax climate. That means making sure that every firm in the state pays a low, non-discriminatory, easy-to-comply-with tax rate.”
Jeffery Reynolds ([email protected]) writes from Portland, Oregon.
