Wednesday, October 14, 2009

Has DeLeo Lost it Already?

From today's Patriot Ledger, the Speaker's plan for saving Massachusetts is gambling and the film tax credit. No, this is not a joke. The two biggest state gimmicks in town are what the Speaker views as the two most important aspects to combating our tough budget picture -- not small businesses, not our research industry and not our struggling cities and towns.

The answer to the state’s budget woes is job creation through expanding the gambling and film production industries, House Speaker Robert DeLeo said Tuesday.

Defending the state’s push for gambling and its controversial film tax credit program, DeLeo told The Patriot Ledger editorial board that one of his priorities is job creation.

First, there isn't a single, solitary "tax incentive" on the books that's more useless or wasteful of our tax dollars than the film tax credit, especially if it's meant to be an "answer to the state's budget woes." For every three dollars we invest in the industry, we get a dollar back. We pay off 25% of a production's entire costs, including Tom Cruise's $20+ million paycheck, even if the movie company doesn't employ a single, solitary Massachusetts-based employee, paying Massachusetts income taxes. Not only that, but the film industry is excused from paying the same sales taxes that we all pay. The Film Tax Credit, if it's meant to help the state's budget, is literally as helpful as flushing tens of millions of dollars every year down the toilet.

Second, gambling has never, ever solved a state's budget problems. New York, Connecticut, Pennsylvania and New Jersey all have much more gambling than we do as a state, including slots, and yet all have higher taxes for residents. Slots does not solve budget woes. They in all likelihood cost a state money in the long run, due to lost small business, decreased use of the state lottery system and literally tens of millions more in costs that must be mitigated (but can never be prevented, so long as slots are legalized).

Speaker DeLeo must be honest. He doesn't support slots because of the state's budget situation, he supports them because of the importance of race tracks in his district and the powerful track lobby. Speaker DeLeo does not support the Film Tax Credit because of the budget picture, he supports them for nice headlines and, again, the film lobby. There was a widespread effort to cap the film tax credit on celebrity stars so that the state only paid its 25% on the first $2.5 million of an actor or director's salary -- and one Tom Cruise movie threatening to leave the state later, the effort at even that little bit of sanity was tossed aside. Can Speaker DeLeo at least be intellectually honest?

Update: in the article, it's made clear that the state's going to have to make about $600 million in cuts. The Film Tax Credit costs this state upwards of a 100 million a year. Cutting it would get us roughly 10% of the way there. And this is what Speaker DeLeo considers one of the two most important programs in the state right now in restoring our budget!


Middleboro Remembers said...

Nice blog, Ryan!

Is that a sucking sound that can be heard as real job creation goes over everyone's head?

WBUR did a recent program that was mostly ignored about GREEN - as in energy and not slots.

Roughly half of energy that's consumed goes to transportation and the other half to buildings.

Experts tell us that we can easily save the first 30% of the energy used in buildings with little effort and little cost.

Bear with me on this, Ryan!

Now, let's just say Beacon Hill does more to promote "Energy Efficiency."

I save $100 per month in home energy costs, maybe I can eat out a few times at a local restaurant, have my car repaired by a local mechanic, hire the local plumber to repair the leaky faucet or some other "local" venture.

During last year's winter, we traveled around town and noted the wonderful historic homes that were so poorly insulated, they had no snow on their roofs. Duh?

Let's just say Beacon Hill began to promote energy retrofitting as a way to create local jobs. You sure can't outsource insulating an attic to China.

Each dollar I save improving my home's energy efficiency is a permanent reduction in cost and a permanent increase in my discretionary income.

As you know, Bob Massie has long promoted this idea and since New England lacks energy reserves, it makes great sense.

The first 30% is easy -- install CFLs (CFLs = compact fluorescent lamps. LEDs if you have the resources), power strips on the "phantoms" - coffee makers, computers, tvs, VCRs, DVD players, buy the most energy efficient appliance available, caulk, weatherstrip.

Spend the $20 or so to buy an energy meter to monitor the suspected "energy guzzlers."

We discovered that the side by side refrigerator consumed so much energy that replacing it with an energy efficient model actually paid for itself in 6 months just in energy savings.

For $40 or so, buy an indoor clothesline as a gift to yourself.

Each bogus revenue scheme isn't putting $$$ back into my pocket in the same way reducing energy costs would.

Maybe if the blinding lights of Hollywood and the glitter of the Fool's Gold of Casino Gambling weren't obscuring the vision of Beacon Hill, they could figure out more sensible ideas for local job creation.

Just my thoughts!

Kosta Demos said...

While I agree that expanded gambling is a black hole of social costs, I have to take issue with your dismissal of the film production incentives as a net loss for the state economy.

My wife and I run a small, digital imaging and printing company and have seen an over-all increase in contract receipts of almost 26% since the incentives were put in place as a direct result of new film production work.

So, okay, this kind of production revenue is a short term injection - it's not like movies are ever going to be a part of our baseline economy. I think DeLeo is definitely off-track there. But it sure doesn't hurt. My wife and I pay taxes on that income and on the purchases we make with that income. Isn't that a gain for the city and the state?

Also, where do you get that 3 to 1 loss ratio from? Does it take secondary revenue into account?

These questions are sincere. I've always been skeptical about targeted industrial tax breaks. But now my personal good fortune is making me wonder...

Ryan said...

Kosta, thanks for your thoughtful comment. I tried to actually be careful how I phrased myself on the film tax thing. DeLeo said he wanted them to *help the state budget.* However, there's no way in heck these tax credits add to the state budget. The studies have been done (MBPC, etc.); for every three dollars we spend, we only generate $1 in new income for the state -- and that's not even $1 going to the state coffers, just new growth that wouldn't have otherwise been there.

That's not to say jobs aren't created, but DeLeo's goal in this -- according to himself -- is to spur the income going into the state budget. That's just not happening; the tax credit is a complete drain, a rather large one at that (at least compared to the budget deficit).

Now, none of this is to say I don't think our state should pursue a strategy to capture more of the film industry, but I think we can have a happy balance where we're not just giving away the farm. Who else in this state gets 25% of all their expenses paid for by the state? Why not make it a tax write off instead of a credit, or cap the celebrity salaries and make it 15% instead of 25%? There's probably some kind of balance where we can at least make our efforts to attract this industry revenue neutral. If we can do something revenue neutral, or close to it, I'd wholeheartedly support it.

Anonymous said...

We should be thankful that he is not in jail. That's the best we should expect from a Speaker.

About Ryan's Take