General Assembly needs to take a hard look at film tax credit scheme
Another session of the General Assembly is upon us. This is an election year and there will be more posturing under the Gold Dome than a prima ballerina in a performance of “Swan Lake.”
One of the big issues will be how to deal with Gov. Brian Kemp’s call for the Legislature to cut 4% from many program budgets this fiscal year and 6% next year in case of an economic downturn. The cuts would amount to some $500 million.
While they are at it, someone needs to take a hard look at Georgia’s much-ballyhooed film tax credit. A recently released state audit says what many have thought all along — the economic benefits have been grossly exaggerated, and it is costing We the Unwashed money.
This may be new news to some, but not to Kennesaw State University economics professor J.C. Bradbury who produced a study last year entitled “The rapid widespread propagation of specious information regarding Georgia’s film industry.” That is economist-speak for saying that Hollywood’s numbers are as inflated as Sean Penn’s ego.
Dr. Bradbury’s analysis posited that Georgia’s film industry contributes approximately $3 billion to Georgia’s $588 billion GDP, or approximately 0.5% or 1/200th of the state’s economy, a rather small part of our economy.
I wrote about his study last August and got a lot of mail from readers around the state questioning the wisdom of giving away so much money to an industry group threatening to boycott the state after an anti-abortion bill was passed by the General Assembly and signed into law by Gov. Kemp.
I am not a big movie fan — I think the last movie I saw was “Lassie Come Home,” starring, uh, Lassie — but I suspect the boycott talk is just so much Hollywood hooey. The film industry is not about to pass up the billions of dollars the state has been doling out to them.
One response defending the program said I was totally wrong and that I had become “a grumpy old man” (I threatened to sue for libel until my lawyer told me to go look in the mirror and see if a grumpy old man was staring back at me) and that Dr. Bradbury was “clueless.”
I wonder how he feels now about the state audit that says the economic benefits of the film credits have, in fact, been exaggerated and that the Department of Economic Development has used an inflated multiplier to pump up the numbers as Dr. Bradbury suggested in his report and that most of the wages from productions were paid to non-residents, including high-salaried, out-of-state talent.
It seems the state currently spends more dollars doling out tax credits to the film industry than it spends on our court system, driver’s license services, Georgia State Patrol, housing juvenile offenders and criminal case investigations combined — services I think we would find more important to our quality of life than an episode of “The Walking Dead.”
Auditors recommend the General Assembly cap how much money film projects can get from the tax credit. Currently there is no cap. The state audit found millions of dollars of ineligible expenses and inflated numbers by the film companies. And, according to the audit, about 80% of the credits are sold off by film companies that pay little or no taxes in Georgia to people or companies that do owe state taxes.
The audit says, “The film tax credit results in significant revenue loss for the state by reducing income tax revenue that would have been paid otherwise. The lost revenue includes income taxes owed by tax credit purchasers on activity unrelated to film production.”
Here is how it works: An entity owing the state $1 million in taxes could purchase that amount in tax credits from a film production company through an intermediary for around $900,000. The buyer purchasing the credits then submits the tax credits to the treasury rather than making a tax payment. Nice, eh?
No doubt, the Hollywood crowd — assuming they aren’t too busy boycotting the state (Wink! Wink!) — will respond with some slick PR campaign defending the massive giveaways and killing the messengers but in my opinion and that of the state auditors, the state government needs to get this boondoggle under control now.
Admittedly, I am a grumpy old man and don’t know much about show business, but I think even Lassie would agree that the state’s current film tax credit scheme is a bunch of poop.