Today’s Southern Pilot features a Scott Mooneyham article about the proposed expansion of North Carolina’s tax credit to movie and TV production studios.
Poor Brad Pitt. And what about that sad -fellow Steven Spielberg? Times are tough everywhere. They need more money. And thanks to the North Carolina General Assembly, it looks as if the North Carolina taxpayer is going to come through.
The state House was expected to pass legislation this week that would extend some tax breaks to a range of industries in an attempt to lure new business to the state. The biggest beneficiary could be Hollywood and the movie-making industry.
In total, the tax break legislation could be worth $300 million over five years. But really, it’s a guess.
Hmmm, $300 million in tax breaks to Brad Pitt and Steven Spielberg. Remember that next time your state representative claims that state government is “cut to the bone” and they had no other options than to fire schoolteachers.
To see the reports used by the N.C. Film Office to defend such nonsense, see here.
Unsurprisingly, the studies are flawed. They talk a lot about the benefits, and mention the amount of tax credits granted, but fail to mention opportunity costs.
How much wealth and how many jobs would have been created if those resources would have instead been invested in other business ventures? How can they or anybody know that film production is the highest valued use of the land, labor, capital, etc?
Also, what about the jobs not created because NC’s tax rates are higher in order to support the Hollywood tax credits. Why not extend the same tax credits to every business, if they are such great “investments”?
Making matters worse, the report itself even admits that the tax credit expansion to 25% will be a net revenue loser for the state and local governments. This means that your taxes are going to subsidize breaks for wealthy Hollywood big shots. On page 9 of the pdf:
This tax impact is equivalent to a combined state and local return on revenue investment of 0.92 in 2010 and 0.89 in 2011. Considering only state tax impacts, the return on investment is equivalent to 0.69 in 2010 and 0.67 in 2011. In other words, for each dollar of state credit cost, the state is projected to collect an estimated $0.69 of additional tax revenue.