Tags: Hollywood | Oscars | tax | breaks

Hollywood Elite Celebrate Oscars ... Tax Breaks, Too

Saturday, 23 Feb 2013 09:46 AM

By Matthew Auerbach

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Image: Hollywood Elite Celebrate Oscars ... Tax Breaks, Too
Actress Emma Stone and 2013 Oscar host Seth MacFarlane present the 85th Academy Awards nominations for Best Actor. (AP Photo)
With the 85th annual Academy Awards coming up Sunday, Hollywood has every right to feel good about itself. Last year marked the first rise in ticket sales since 2009, which accounted for a record take of $10.8 billion.

Ticket buyers aren’t the only ones forking money over to the film industry.

Glenn Reynolds’ column in the Wall Street Journal outlines the overwhelming number of states providing tax incentives to moviemakers as a way of attracting them to their neck of the woods to make their latest masterpiece.

For example, Virginia gave $3.5 million to this year's Oscar-nominated “Lincoln.”

Editor's Note:
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Five of the nine Best Picture nominees last year were filmed in states where the production company received tax incentives.

The thought behind this move is simple: if a movie company comes to town and sets up shop for a period of time, job opportunities will be provided for local residents.

Unfortunately, that is not the case, the Journal reports.

According to the Center on Budget and Policy Priorities, approximately $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010.

This may give elected officials the opportunity to get their photos taken with A-list stars, but that’s about the only opportunity that’s offered.

The number of states offering tax breaks has grown from five in 2002 to 45 in 2009, the WSJ piece says.

There are indeed jobs to be had when production on a film gets underway, but the locals aren’t the ones doing the work.

In its 2012 study “State Film Studies: Not Much Bang For Too Many Bucks” the Center on Budget and Policy Priorities discovered that movie-related jobs invariably to go to non-residents who show up, then go home once filming is completed

“The revenue generated by economic activity induced by film subsidies falls far short of the subsidies' direct costs to the state,” the study notes. “To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies' positive economic impact.”

Reynolds cites a recent fiasco in Michigan is an example of how things can go wrong.

In Summer 2011, Former Democratic Gov. Jennifer Granholm saw the completion of a project she believed would to woo the motion picture industry to her state: an expensive state-of-the-art studio facility built on the site of a former General Motors factory in Pontiac.

State leaders trumpeted the plan as a way of moving from old-style industry to new.

Despite tens of millions of dollars in state investment, the promised 3,000-plus jobs didn't appear. The Detroit Free Press reported last year that the studio employed no more than 20 people.

The studio has defaulted on interest payments on state-issued bonds and the guarantors—the state's already stressed pension funds—may wind up holding the bag.

“In retrospect, it was a mistake,” admitted Robert Kleine, the former state treasurer who signed off on the plans in 2010.

Michigan has drastically scaled back its subsidies under Granholm’s successor, Republican Gov. Rick Snyder, who said he has better uses for the money, such as spending it on schools, police or the successful “Pure Michigan” ad campaign aimed at drawing tourists to the state.

Iowa stopped handing out incentives in 2010. Other states, including Alaska and New Jersey, are said to be re-thinking their positions as well.

The Center on Budget and Policy Priorities laid it out in black and white.

The $1.5 billion in subsidies that states provide, it said in its study, “would have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police patrol officers.”

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