Your Film Tax Credit Dollars at Work–for Mark Wahlberg

It’s looking like the film tax credit is going to be with us for quite a while longer. Last year the Governor’s idea of scrapping it altogether in favor of a tax credit for working poor families met with very stiff resistance from film tax credit fans. This year his more modest plan to prune it back to its Romney-era size (in part by imposing a cap of $7 million per movie and by eliminating the option to sell the credit) hasn’t really been heard from since its January launch.

But if we can’t stop this perpetual train robbery, we can at least learn where the money is going (h/t to Jamie Eldridge and other members of the Senate who succeeded in getting us this window to peer into).  In 2014, the most recent year for which film tax credit information is available, one very big winner was Massachusetts native Mark Wahlberg, the star of Ted 2, which was filmed here that year. (If, like me, you haven’t caught Ted 2 or the original Ted yet, Wahlberg’s co-star is an animated bear and both stars’ vocabularies are largely scatological.)

We taxpayers ponied up $14 million toward Ted 2‘s production costs. For that money we could have paid for upgrades to 30 subway cars to extend their service for the better part of a decade or funded a year’s worth of rental vouchers for 2000 homeless families.  So far, Ted 2 has taken in over $240 million in box office and video sales, an amount that ought to reassure investors in Mark Wahlberg’s next Massachusetts venture that the film tax credit is not strictly necessary to its commercial success.

And as we were particularly reminded this past Monday, Mark Wahlberg’s next Massachusetts venture is already in production. Opinions vary on whether it’s too soon for a movie about the Marathon bombing and whether a Marathon bombing movie made by Mark Wahlberg will ever be appropriate, but come December, we’re going to have one called Patriots Day. Wahlberg and his production company at CBS have tiptoed around the movie’s possibly explotative nature and have offered a solemn but indefinite vow to “get it right.”

Apparently getting it right does not include respecting the wishes of any 2016 Marathon runners who don’t care to appear in the movie.

Wahlberg2016

Here’s an idea.  If the Patriots Day folks are really interested in getting it right, they could announce that they’re making this movie on their own dime and won’t ask us taxpayers to chip in a quarter of the production costs via the film tax credit.

Let’s Occupy the Film Tax Credit

A reprise of an earlier post, in light of the Herald article today reaffirming the folly of the state’s film tax credit program.

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Original Post: May 7, 2013

Old joke – a merchant tells a customer that the goods he’s selling actually cost him more than he’s charging the customer for them. When he’s asked how he can afford to sell them at a loss, he answers: the profit comes from selling in volume.

Sadly, something akin to that joke is serving as the premise for our state’s film tax credit program: all our tax break giveaways are — somehow — going to boost our bottom line.

This is the eighth year Massachusetts has offered a film tax credit. For the first six of those years (2006-2011, the years for which data is available), the state gave away $327 million in credits. These tax credits attracted $186 million in new spending, which yielded $44 million in new revenue. That is to say, for every dollar we spent on film tax credits, we lost 87 cents and retained 13.

Given its abysmal record so far, why is it (to borrow a line from a movie that was not filmed in Massachusetts) that we just can’t quit the film tax credit? Let’s review.

In 2005, Massachusetts enacted a relatively modest film tax credit, which was signed by Governor Mitt Romney. The credit under that program was limited to $7 million, and it was not refundable. Also in 2005, director Martin Scorsese filmed a movie about Boston, The Departed. Most of the filming for that movie, however, took place not in Boston but in New York. And especially after that movie won four Oscars in 2006, people got to talking about how other states were poaching on what should be our movies and how we needed to do something about it.

So in 2007 (possibly influenced by one film director who said that film executives “would shoot a movie on Mars if they could get a 25 percent tax break”), Massachusetts opened the spigot wide, where it remains today. Now we reimburse film companies for 25 percent of their production and payroll costs, and we also throw in an exemption from the sales tax. Most significantly, the film tax credit is now refundable and transferable. This means that after the film company has paid the state taxes it owes, it can sell the remainder (usually at a slight discount) to a company or individual who owes state taxes and who can therefore capture the full value of the credit. As soon as he signed the legislation, Governor Deval Patrick (apparently unconcerned about criticism that the point of the the film tax credit was to let politicians hobnob with Hollywood celebrities) hurried off to hang with Denzel, who was in town filming The Great Debaters. And probably at exactly the same time, markets sprang up for the buying and selling of film tax credits.

Who’s buying them? Primarily insurance companies, financial institutions and other corporations that owe state taxes. Of the $327 million in film tax credits that have been generated since 2006, these organizations have purchased $280 million, or 86 percent. They have paid an average of 89 cents for a dollar’s worth of tax credit and thereby reduced the state taxes they would otherwise have had to pay by $30 million.

In the difficult budget years after he signed the film tax credit into law, Governor Patrick has lost some of his original enthusiasm. He now believes that the credit should be capped at $40 million per year. There’s no cap under current law. This is an entitlement program — filmmakers are free to come to Massachusetts and we are obliged to pay them 25 percent of their production costs, whatever those costs are. And if past experience is a guide, 87 cents of every credit dollar we give will simply disappear. The Department of Revenue estimates that the projects claiming the film tax credit in 2012 will cost the state more than $78 million. Representative Angelo Scaccia of Boston filed an amendment to the House budget last month to cap the film tax credit at $40 million, but it was rejected; the prospects for closing the spigot are not good.

So what to do? How about — if you can’t beat ’em, join ’em? The market for buying film tax credits is open to everyone. Maybe some civic-minded individuals or companies or individuals who owe state taxes could purchase tax credits at the going rate of 89 cents on the dollar and then, instead of keeping the 11 percent savings, donate it to a worthy cause. Or we can organize ourselves into (gasp!) collectives and then share the proceeds among us. As the insurance companies and financial institutions have demonstrated, there’s lots of money to be had. If they can make millions from this policy debacle, why can’t we?

So what do you say? It’s showtime!

Let’s Occupy the Film Tax Credit

Old joke – a merchant tells a customer that the goods he’s selling actually cost him more than he’s charging the customer for them. When he’s asked how he can afford to sell them at a loss, he answers: the profit comes from selling in volume.

Sadly, something akin to that joke is serving as the premise for our state’s film tax credit program: all our tax break giveaways are — somehow — going to boost our bottom line.

This is the eighth year Massachusetts has offered a film tax credit. For the first six of those years (2006-2011, the years for which data is available), the state gave away $327 million in credits. These tax credits attracted $186 million in new spending, which yielded $44 million in new revenue. That is to say, for every dollar we spent on film tax credits, we lost 87 cents and retained 13.

Given its abysmal record so far, why is it (to borrow a line from a movie that was not filmed in Massachusetts) that we just can’t quit the film tax credit? Let’s review.

In 2005, Massachusetts enacted a relatively modest film tax credit, which was signed by Governor Mitt Romney. The credit under that program was limited to $7 million, and it was not refundable. Also in 2005, director Martin Scorsese filmed a movie about Boston, The Departed. Most of the filming for that movie, however, took place not in Boston but in New York. And especially after that movie won four Oscars in 2006, people got to talking about how other states were poaching on what should be our movies and how we needed to do something about it.

So in 2007 (possibly influenced by one film director who said that film executives “would shoot a movie on Mars if they could get a 25 percent tax break”), Massachusetts opened the spigot wide, where it remains today. Now we reimburse film companies for 25 percent of their production and payroll costs, and we also throw in an exemption from the sales tax. Most significantly, the film tax credit is now refundable. This means that after the film company has paid the state taxes it owes, it can sell the remainder (usually at a slight discount) to a company or individual who owes state taxes and who can therefore capture the full value of the credit. As soon as he signed the legislation, Governor Deval Patrick (apparently unconcerned about criticism that the point of the the film tax credit was to let politicians hobnob with Hollywood celebrities) hurried off in order to hang with Denzel, who was in town filming The Great Debaters. And probably at exactly the same time, markets sprang up for the buying and selling of film tax credits.

Who’s buying them? Primarily insurance companies, financial institutions and other corporations that owe state taxes. Of the $327 million in film tax credits that have been generated since 2006, these organizations have purchased $280 million, or 86 percent. They have paid an average of 89 cents for a dollar’s worth of tax credit and thereby reduced the state taxes they would otherwise have had to pay by $30 million.

In the difficult budget years after he signed the film tax credit into law, Governor Patrick has lost some of his original enthusiasm. He now believes that the credit should be capped at $40 million per year. There’s no cap under current law. This is an entitlement program — filmmakers are free to come to Massachusetts and we are obliged to pay them 25 percent of their production costs, whatever those costs are. And if past experience is a guide, 87 cents of every credit dollar we give will simply disappear. The Department of Revenue estimates that the projects claiming the film tax credit in 2012 will cost the state more than $78 million. Representative Angelo Scaccia of Boston filed an amendment to the House budget last month to cap the film tax credit at $40 million, but it was rejected; the prospects for closing the spigot are not good.

So what to do? How about — if you can’t beat ’em, join ’em? The market for buying film tax credits is open to everyone. Maybe some civic-minded individuals or companies or individuals who owe state taxes could purchase tax credits at the going rate of 89 cents on the dollar and then, instead of keeping the 11 percent savings, donate it to a worthy cause. Or we can organize ourselves into (gasp!) collectives and then share the proceeds among us. As the insurance companies and financial institutions have demonstrated, there’s lots of money to be had. If they can make millions from this policy debacle, why can’t we?

So what do you say? It’s showtime!