State has actually doubled its investment in film industry tax credits

by Jon Chesto
Mass. Market
July 9, 2009

The report that the Department of Revenue issued last week shows that for every dollar that goes out to the film and TV industry in tax credits, the state’s general fund gets about 16 cents in tax revenue in return. At first glance, that would seem like a bad investment.

But a closer read of the report shows that the state has actually doubled its investment with these tax credits. The credits were never just about refilling the state coffers. Instead, they were aimed at fostering the development of an industry that had limited traction here before the first set of incentives took effect in January 2006. When big-budget Boston-set movies such as “The Departed” were largely being filmed elsewhere, state lawmakers figured it was time for change.

The DOR report, the most comprehensive evaluation I’ve seen on the tax credits’ economic impact here, takes a balanced approach, pointing out some of the tax credits’ shortcomings as well as the benefits. 
 Production activity generated $16 million worth of tax credits in 2006, $38 million in 2007 and $113 million in 2008 (the tax incentives were sweetened in mid-2007, accounting for much of the increase). That translates into $167 million in tax credits that the state has awarded in the program’s first three years.

What are we getting for that money? Actually, quite a lot. The tax credits helped create the equivalent of as many as 1,800 full-time jobs here in 2008, according to the DOR report, and we’ve seen at least eight feature films arrive with Massachusetts production budgets that exceed $30 million.

The state has essentially doubled that $167 million investment, with local spending on wages, transportation, hotels, set construction and other expenses totaling an estimated $302 million over the three-year period.

The $302 million figure is a conservative estimate that doesn’t include wages for highly-paid actors and others who don’t live in this state (at least half of the wages paid to people on Massachusetts productions goes to California residents). The figure also doesn’t include an estimated $45 million in production work that would likely have been done here anyway, mostly on public TV programs and documentaries.

That represents a strong initial return on the state’s investment, a return that is only likely to grow as the local film crew base expands to keep pace with the numerous productions coming here. While the A-list stars may still hail from California, hopefully we’ll get to the point soon where the bulk of the workers needed to shoot and produce several feature films at once can be found here in Massachusetts. 

The new movie studio complexes planned for Plymouth and Weymouth will certainly help expand the industry’s permanent work force in this state if they come to fruition. Make no mistake: the developers behind those projects wouldn’t even be considering Massachusetts if it wasn’t for our tax credits.

There had been some talk on Beacon Hill about putting a cap of $2 million on the amount that one person’s salary can count toward a production’s tax credits. Such a cap would chase away many of the big budget films that would hire the widest range of local workers, and it would represent a huge setback in this state’s efforts to expand the industry here. Lawmakers quickly shelved that idea.
 As states grapple with huge budget problems, film tax credits have become a popular target in places like New York and Connecticut.

So far the public opposition in the Massachusetts Legislature has been limited largely to one lawmaker, Rep. Steve Damico of Seekonk (and film workers in his district probably would benefit more from Rhode Island’s tax credits than they would from Massachusetts’ credits).
However, it’s possible that state legislative leaders could revisit a salary cap and other limits at some point if this state’s rough budget situation worsens significantly. Hopefully, they’ll at least make those decisions with a full understanding of the positive impact that the film industry’s tax credit program has had on the local economy.

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