By Jim O’Sullivan
STATE HOUSE NEWS SERVICE
March 3, 2010
STATE HOUSE, BOSTON, MARCH 3, 2010…… Critics of the state’s film tax credit program ripped the incentives Wednesday as poor fiscal policy when the state can least afford it, while industry proponents defended the $125 million program as a boon to the local creative economy.
At a crowded Gardner Auditorium hearing, both sides honed arguments that have swirled since the state passed the incentives in 2006, sharpened by the state’s economic pangs.
Michael Widmer, president of the business-backed Mass. Taxpayers Foundation since 1992, said the state could effectively employ a blend of 2,000 police officers, firefighters and teachers for the cost of the program.
“In my 20 years at the foundation … I would say this is probably the most costly tax credit with the least economic benefit in my experience,” Widmer said.
Appearing on a separate panel, television producer Michael Maschio, who worked as a producer on the show “Spenser: For Hire,” said he was shooting an ABC pilot in Boston that, if picked up as a series, could bring $2 million per episode to the state.
“We wouldn’t be here with this show if it were not for the tax incentives,” Maschio told the Revenue Committee. “It will leave in a heartbeat if we don’t get this tax credit.”
The tax sweeteners, hailed as the keys to jumpstarting the state’s motion picture industry, offer sales and use tax exemptions, a transferrable 25 percent payroll credit, and a transferrable 25 percent credit on production expenses. The Department of Revenue expects to issue $125 million in credits next fiscal year. Gov. Deval Patrick has proposed capping the program at $50 million.
Under a bill (H 3854) filed by Rep. Steven D’Amico, a Seekonk Democrat, the state would revert to the 2006 incentive levels, imposing a $7 million limit on each production, reducing current credits to 20 percent, and excluding salaries above $1 million.
“We, in effect, issue Hollywood a blank check,” D’Amico told the panel. Noting cutbacks across state government, he said, “It’s time for us to impose that same level of budgetary discipline to film tax credits.”
The crowd of more than 300 in the capitol’s largest hearing venue was overwhelmingly in favor of the current tax credits, jeering some speakers who sided against the program and clapping for those in support.
Rick Cambria, a Rehoboth resident and former construction worker now in the film industry, won smiles and hoots of approval from the audience when he said D’Amico wanted to “take away my job. He might as well take my house away too.”
The state’s economic condition served both sides of the argument, with critics arguing that Beacon Hill ledgers, awash in red ink and facing an estimated $2.7 billion deficit next year, can ill-afford to dole out taxpayer dollars to an industry whose biggest earners reside out of state. Incentive backers said the prospect of netting jobs from both direct investment and ancillary spending, with unemployment hovering above 9 percent, should prove a crucial argument to lawmakers.
Citing Department of Revenue (DOR) estimates, the Mass. Film Office claims the film industry shot 13 major films here in 2008, generating $452 million in direct spending. Proponents of the current policy said local production spending would fall 80 percent under the rollback.
Senate President Therese Murray, still hoping to lure a $400 million studio investment to her Plymouth hometown, on Wednesday defended the tax credits, saying towns in the Cape Cod portion of her district had seen an economic uptick in art galleries, hardware stores, hotels and restaurants.
“If you’re going to have a consistent tax policy, you can’t keep changing it like this,” Murray told the News Service. “I think it brings in money to the Commonwealth beyond what DOR says.”
Charles Merzbacher, a filmmaker and Boston University film professor, said the tax policy had resulted in a “fundamental, positive transformation of the creative economy in the Commonwealth.”
Merzbacher said the program had allowed his BU students to build careers in Massachusetts.
“If the Legislature tinkers with the … credits, it will not simply send a chill through the industry, it will turn off the switch,” Merzbacher said.
Jennifer Weiner, a policy analyst at the Federal Reserve Bank of Boston, said the state faced aggressive competition from others looking to entice the same industry, some with more generous tax lures. She said policymakers should not regard the tax credits as onetime investments with long-term dividends.
“If this competitive environment persists, Massachusetts is likely to have to continue to offer [film tax] credits year after year,” Weiner said.