Lights, Camera, Corporate Welfare

It’s no surprise that Maryland Democrats will fall all over themselves to lavish taxpayer dollars on favored constituencies, especially when it comes in the form of Hollywood glitter:

Dozens of star-struck lawmakers flocked to an Annapolis wine bar Friday evening to meet Kevin Spacey, star of the Netflix series “House of Cards,” and to hear a pitch for a generous tax credit that would keep its production in Maryland.  Delaying their usual rush to get out of town on Fridays, senator and delegates of both parties dropped by to meet and greet the Oscar-winning actor at a private reception. The real Annapolis politicians couldn’t wait to get a glimpse of the man who may be the nation’s most popular fake Washington politician – the scheming and unscrupulous Frank Underwood.  Not surprisingly, lawmakers on their way into the Red Red Wine Bar on Main Street for the most part expressed strong support for the hefty tax credit being sought by the producers of “House of Cards.”

House of Cards has already benefitted from $26 million in taxpayer subsidies, and The House is considering an O’Malley administration sponsored bill to increase the credit by $11 million, meanwhile earlier this week the Senate approved increasing the subsidy to $18.5 million.
House of Cards tells the story of Frank Underwood a cold, calculating, congressman, who schemes his way to the oval office through manipulation and murder. 
The irony is that the show makes the case for limited government better than any Tea Party rally ever could.
In a move reminiscent of Frank Underwood, the producer of House of Cards, Media Rights Capital, sent a letter to Governor O’Malley threatening to pick up stakes and move production out of Maryland if the state did not provide millions more in subsidies.  The letter said in part:
We wanted you to be aware that while we had planned to begin filming in early spring, we have decided to push back the start date for filming until June to ensure there has been a positive outcome of the legislation. In the event sufficient incentives do not become available, we will have to break down our stage, sets and offices and set up in another state.
Some may be surprised to see professed “fiscally conservative” Republicans support this corporate welfare for Hollywood.  In fact, every single Republican in the Senate voted for the increased subsidy.  The only no vote came from über progressive Paul Pinsky.
Even a Republican gubernatorial candidate, and a Lt. Governor candidate expressed support for the subsidy.

Among the delegates who couldn’t resist were one candidate for governor and another for lieutenant governor.  Del. Jeannie Haddaway of Talbot County, the running mate of GOP candidate David R. Craig, said she’s a big supporter of the program. “On the Eastern Shore we’ve seen the benefit of the film industry, most recently with “Wedding Crashers” in St. Michaels,” she said.  For Del. Ron George, who is seeking the Republican nomination for governor, the party was only a few steps from his Annapolis jewelry store.  George, an occasional actor who said he’s probably the only Maryland lawmaker with a Screen Actors Guild card, expressed support for the film tax credit program as he headed in to meet his union brother.

Haddaway’s support for the subsidies doesn’t surprise me as she’s proposed millions in bond bill pork for her district. 
However, Ron George, one of the Republicans who, actually walks the walk in Annapolis, voicing support for these subsidies is surprising.  I vividly remember a House GOP Caucus pre-session briefing, in 2010 where Ron chastised the Maryland Chamber of Commerce for “taking the wind out of his sails” by rolling over on principle for meager scraps from the O’Malley administration.  It’s rare that you’ll find a Republican legislator willing to call out those who are, at least ostensibly on their side.  I hope Ron and Jeannie reconsider their support for this clear case of corporate welfare.
Furthermore, there is no clear evidence of the perceived economic benefits these subsidies.
  •           Film production only creates temporary jobs, and companies can leave at the drop of a hat. The Maryland Film Office estimated that House of Cards Season 1 “resulted in local hiring of 2,193 Maryland crew, cast, and extras” but it’s pretty clear based on the letter above that companies can bolt the second they get a better deal. And those jobs aren’t available once filming wraps up.
  •        Programs do not “pay for themselves” as is often touted. Proponents will argue that increased economic activity will create enough new tax revenue to make up for the initial loss of revenue from the credit. That’s not true. In fact, film tax incentives are a net loss to states, and there are plenty of studies demonstrating this.
  •        Estimates of economic impact should be taken with a grain of salt. As we noted a few years ago: “[a]dvocates rightly point out that one dollar of film spending trickles through the economy and creates more economic activity. For instance, if a film production spends one dollar on wages for a worker, that worker will take that income and spend it in the economy, creating income for others, and so on…But the fact that film productions impact the broader economy is not unique to this industry.” If those dollars from the State of Maryland weren’t spent on film production, they’d be spent on something else and still cycle through the economy. Those 2,193 employees the Maryland Film Office is touting likely would have happened anyway.

It’s hard to imagine a better example of rent-seeking, crony capitalism, and conspiracy between the rich, the famous, and the powerful against the unorganized taxpayers. A perfect House of Cards story.

I’m sure the state retirees watching the legislature cut hundreds of millions from the pension fund hand out millions to House of Cards feel the same way. 

Disclosure: I have been paid by the Hogan for Governor campaign to do research—not this research—but research on the O’Malley-Brown administration.  I am posting this in my capacity as a Red Maryland editor. 

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