URI professor’s conclusion differs from states, Tax Foundation
By Richard Asinof and Ted Nesi
Providence Business News
April 27, 2010
PROVIDENCE – Rhode Island’s tax credit for film and TV productions generated $8 in economic activity for every $1 invested between 2005 and 2009, according to a new study.
The study by Edward M. Mazze, economics professor at the University of Rhode Island, and former dean of URI’s business school, found that the $57.6 million in film tax credits Rhode Island issued over the four-year period created a total of $465.51 million in economic activity.
The credits created and supported 4,184 new jobs, generated $181.7 million in direct wages and $152.6 million in indirect wages, and led to $34.1 million in state and local taxes, Mazze reported.
“The economic benefits of the tax credit far outweigh the state’s investment in the program,” Mazze said.
The study represents the first comprehensive examination of the film tax credit’s impact on the Rhode Island economy, according to Steven Feinberg, executive director of the Rhode Island Film and TV Office. The study was funded by the nonprofit Rhode Island Film Collaborative.
Mazze’s study also faulted a 2008 report by the R.I. Department of Revenue, which said the state got back an average of 28 to 32 cents for each dollar given to the film and television production companies in tax credits from 2005 through 2007.
A report last year by the Mass. Department of Revenue reached a similar conclusion, putting the Bay State’s take from its film tax credit at 16 cents for each dollar handed out, with most of the benefits going to businesses and workers from out of state.
But, Mazze said, the Rhode Island “report did not take into account the revenue generated and taxes paid by individuals and businesses [that] benefited from the film and television production activities in the state.”
Feinberg, who has collected anecdotal evidence over the years to support his contention of the economic benefits of the film tax credit, was thrilled with the report.
“This is all new money coming into our state,” Feinberg said. As a result, Rhode Island has been able to develop its work force and infrastructure around the film and TV industry, he said.
Feinberg cited the 200 percent growth since 2005 in Rhode Island membership in the New England Studio Mechanics IATSE Local 481, which represents skilled technicians and crafts people involved in TV and film production.
“This is a growth industry,” Feinberg said. “While many other industries are contracting, the film and TV industry is growing at the rate of 18 percent nationally.”
Mazze’s conclusion is in stark contrast with that of a study released in January by The Tax Foundation, a nonpartisan Washington, D.C., think tank., which said state film tax credits fail to spur economic growth or increase tax revenue.
“Motion picture incentives are often touted as ‘job-creating’ programs, but they create mostly temporary positions with limited upward mobility,” Tax Foundation Adjunct Scholar William Luther, the report’s author, said at the time. “The only thing these incentives create is the need for ongoing credits and subsidies. As other states sweeten their incentives, productions move on.”
The number of states that offer “significant movie production incentives” has jumped from just five in 2002 to 44, plus Puerto Rico and Washington, D.C., as of now, according to The Tax Foundation.
Additional information is available at film.ri.gov.