Pulling the Plug on Hollywood Welfare

With a new administration on its way to Annapolis, attention is rightly being placed on one of the easiest programs to eliminate in State government: Corporate Welfare for Hollywood film companies.

A recent Department of Legislative Services draft report on the tax credit points out that what should be plain to everybody looking at the economic reality of these tax credits:

“…the economic activity generated by film productions is of a short duration. As soon as a film production ends, all positive economic activity ceases too. As such, the film production activity tax credit does not provide long-term employment. Maryland has provided $62.5 million in tax credits between fiscal 2012 and 2016 while only receiving a fraction of the tax credit amounts back in revenues to the State and local governments.”

No doubt, the Hollywood tax credit is in serious trouble. Anybody who has a basic understanding in economics should know that when large well-funded corporate entities that are demanding specialized tax relief to conduct business in your state are bad news Most of the economic benefit of these tax increases was almost surely going to production elements, staff, and material that were brought in from out of state, with a transfer of the benefit of those tax credits to out of state. Due to Maryland’s size and location, there are only limited amounts of industry and technical support that will grow in Maryland to create the permanent jobs that champions of this tax credit claim are forthcoming. Sure you’ve got certain small collections of folks who work in craft services, costuming, set-construction and other sectors that can work on both film production and stage production. But claims that Maryland could (or would) become the Hollywood of the East and that a permanent film-based industry would develop here are flights of fantasy.

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What concerns me the most about the tax credit is the number of times the State has gotten star-struck and rolled over and done pretty much whatever the movie companies ask them too. Let us take you back to March when the production company behind House of Cards pulled a power-play to get more state subsidies while wining and dining General Assembly members as they got to rub elbows with stars like Kevin Spacey.  The impact of such lobbying attempts will no doubt be more effective on a freshman class of legislator who has never had such an opportunity before.

It makes no sense, in a state where corporate and individual taxes are as high as they are, to give millions of dollars in subsidies to out of state companies who return pennies on the dollar to our state in the form of tax revenue or economic development. We need to be focused on lowering taxes and improving the regulatory climate so that businesses of all industries and sizes set up shop in Maryland and provide well-paying jobs and create permanent economic benefits to the state. And this tax credit seems particularly ripe for elimination when wealthy out-of-towners are getting more tax incentives to do business in Maryland than working class Marylanders are.

Hopefully the elimination of the film production tax credit will be the first of many steps to reorient Maryland tax policy away from delivering corporate welfare to politically connected classes, and toward a tax policy that promotes growth and prosperity for businesses and individuals alike.

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