Last week’s highly trumpeted study claiming to show amazing economic gains from the state’s film industry tax credit program is being harshly criticized by a legislative fiscal research division analysis.
A memo from the N.C. General Assembly’s Fiscal Research Division (FRD) “concludes that the reported positive return on investment in based on a series of misunderstandings of the State’s tax laws, invalid or overstated assumptions, and errors in accounting.”
More details about the disagreements between the original study’s author and the FRD are outlined in this Carolina Journal article.
The Handfield (first) report estimates the state gains a net $5.2 million impact from the incentive, or $1.09 in benefits for every $1.00 it gives out in credits. When combining state and local fiscal impacts, the net benefit is $25.4 million, or a $1.42 return on $1.00 investment.
But in a blistering rebuttal, Fiscal Research found the state actually loses $45.3 million, which amounts to 54 cents for each $1.00 invested. Even after adding local tax collections, the net loss is $33.1 million, or a 39-cent loss for each dollar invested.
“[Fiscal Research] concludes that the reported positive return on investment is based on a series of misunderstandings of the state’s tax laws, invalid or overstated assumptions, and errors in accounting,” the memo stated.
Memo authors Patrick McHugh and Barry Boardman of Fiscal Research noted in several parts of the memo that glaring errors and mistaken assumptions were brought to Handfield’s attention prior to publication of his report, but he did not change his findings.
“We have not, to date, received satisfactory responses from the author on many of the questions related to the methodology and assumptions used in the report,” the memo stated.