Effectiveness of tax credit is widely debated
By: Jim Panyard | PA Independent
Gov. Tom Corbett
’s austere general fund budget for fiscal year 2011-12 maintains a $60 million tax credit aimed at drawing television and movie productions to Pennsylvania.
The budget presented by Corbett allowed the Film Tax Credit (FTC) program to survive while other subsidies saw reductions or were eliminated.
“My budget retains an array of tax credits, not as a favor to businesses, but as a promise to their workers. New and growing industries, like the film industry that is growing around Pittsburgh and Philadelphia, need a government that knows enough not to shout “cut’ in the middle of production,” Corbett told the General Assembly Tuesday.
Film and television production jobs account for about two-tenths of 1 percent of the state work force, according to the state Department of Labor and Industry.
“The film tax credit, which we are retaining — and never thought to do otherwise — will attract jobs and pump money from outside the state into our economy,” said Corbett.
One of Corbett’s top consultants is a former lobbyist for the film industry.
When the FTC was created in 2006, it authorized a limit of $75 million for the tax credit annually. Last year, the cap on the tax credit was dropped to $60 million, and Corbett decided against raising it.
Tax credits are tax write offs allowed to businesses by the state as a percentage of investments within the state. Pennsylvania’s FTC allows production companies to offset payments they would have had to make in capital stock and franchise taxes, personal income taxes and corporate net income taxes, if at least 60 percent of production costs were incurred in Pennsylvania.
If a film company has a portion of its tax credit left after production, the company can sell the credit to another film maker.
The effectiveness of the FTC as a job creator and revenue generator, not only in Pennsylvania but other states as well, has been questioned and criticized.
Robert Tannenwald, writing for the Center for Budget and Policy Priorities, a liberal Washington, D.C.-based think tank, issued a paper late last year debunking FTCs as an economic generator, claiming they are more glitter than gold. (to see report click here
Iowa, Arizona and Kansas are among the states that have suspended their FTC programs.
The Tax Foundation, a fiscally conservative Washington D.C-based think tank, has said FTCs generate only about 20 cents in tax revenue for each dollar of tax credits.
Other critics have noted film and television production jobs are largely temporary and transient in nature, lasting only for the duration of the production.
“A tax break for the film industry requires higher tax rates on everyone else, hindering job creation in other sections of the economy,” said Nathan Benefield of the Harrisburg-based Commonwealth Foundation, a fiscally conservative think tank.
Another reason for continuance of the FTC by Corbett could be the “no tax increase” pledge he took with Americans For Tax Reform during last year’s gubernatorial campaign.
Corbett would be viewed by ATR as breaking his pledge unless “there is offsetting tax relief in the package,” said John Kartch, ATR's director of communications.