HB 237 bites the dust. Last week in the House Commerce committee, HB237 was summarily tabled without even one question asked or answered regarding the legislation. The subject of the bill was a repeal of the “Film Tax Credit.” This tax policy provides a refundable tax credit (cash back) to producers of film products in the amount of twenty five to thirty five percent of gross expenditures. In fiscal year 2022 it is estimated that these gross expenditures will be $855,000,000. According to the Economic Development Department, the resulting checks written to the producers will be $154,000,000. The trajectory of these expenditures is alarmingly upward. From FY 2020 to 2021 the increase was 118 percent, over double, for the period of FY 2021 to FY 2022 the increase was still thirty six percent.
A number of studies including the Florida Office of Program Policy Analysis and Government Accountability, the Massachusetts Tax Expenditure Review Commission, and Georgia’s Department of Audits found an average of return on investment of between 8 and 14 cents on the dollar. A USC study referenced our own ‘Breaking Bad’ as recovering 14 cents on the invested dollar. Two studies, one by the Martinez administration and one by our current EDD yielded calculations that each job created by the industry cost the State between $50,000 and $60,000. Massachusetts was even higher at $100,000 per job.
It has been represented that we are simply giving back to the industry some of their expenditures that would not have occurred in the State absent the subsidy. This is nonsense as that money would have to roll through the economy some five times just to break even. The problem with this argument is that much of the money may not be staying ‘in state’. If we take Alex Baldwin as an example, there is no requirement that, because he is ‘in front of the camera’ talent, he would even need to establish residency in the State to qualify for the rebate. If he is paid $5,000,000 for his services, he would remit to the State a 6 percent income tax withholding ($300,000) and receive in turn from the State a check for $1,500,000. Little of the net out of pocket of $1,200,000 will remain here, but instead jet back to California.
Economic development is intended to jump start fledgling industries which, at some point, are expected to stand on their own without State subsidy. This industry will readily admit that the ONLY reason they are located here is the 30 percent reduction in their operating expenses and that they will disappear when the subsidy does. This is the worst form of corporate welfare. We are long overdue to at least take a second look at this tax expenditure. HB 237 deserved to be heard.
Rep. Larry Scott, R-Hobbs, has served in the state house since 2015.