The Film Tax Credit Just Gets Better

and better and better. Obviously, I'm no big fan. Now, the whole thing gets even worse. Not only can films receive the tax credits corporate welfare payments, but so too will production companies filming commercials. Every time Sam Adams is advertised on TV now, Massachusetts is kicking in 25% of the costs to produce that ad.

The Globe doesn't paint a rosy picture.

In its high-profile bid to compete with Hollywood and New York as a film production hub, the state is doing more than subsidizing TV series and feature movies through tax credits and sales tax exemptions. It is also underwriting the cost of producing TV commercials in Massachusetts. The Department of Revenue said it has issued more than $2.1 million of tax credits for 37 ad-related productions - with eight more applications pending - since the state started offering incentives two years ago.

Furthermore, per my second link, readers will note that for every 3 dollars this measure will cost the State of Massachusetts, the Bay State will get around 1 dollar in new economic development. That kind of net sum loss would even get CEOs fired.

Unfortunately, Massachusetts just isn't Hollywood. Sure, we want to encourage economic growth and diversity, but that growth has to make sense: we can't be spending more money than we're earning. Massachusetts will no more become the next Hollywood as it will become the next center for corn growth. If we're going to give incentives for filming in Massachusetts, then those incentives should be realistic, revenue neutral and play to our strengths: certainly, there's a media niche Massachusetts can fill. Our history, economy and transportation systems make us an ideal site for many films; we should try to maximize our potential in that arena.

We obviously haven't done that yet, instead resorting to the worst kind of Corporate Welfare. Massachusetts needs to go back to the drawing board, figuring out ways to bring new growth to Massachusetts, without being seduced by the glitzy lights of Tinsel Town. We're not Hollywood or New York - we have the Hancock, not the Rockefeller. Playing to our strengths is key. At least, if law makers can't resist the Hollywood limelight, they need to create bills that make fiscal sense - something no worse than revenue neutral for the citizens of Massachusetts.

Let's Just Let Business Work for Free

Here we go again. Business threatens to leave town. Town gets on its knees and gives up the bank to keep business in town. Business doesn't even have to leave. Never mind the fact that there are other businesses out there to purchase the newly open space (read: new job growth), this particular business (JP Morgan) wasn't even threatening to leave Massachusetts!

The firm looked at moving to other states but ultimately decided to stay in Massachusetts largely for the quality of the workforce, executives said.

Of course, the Globe buried the money quote halfway through its article, but that doesn't change the fact that it's there. They wrote it. The JP Morgan people said it. It's the elephant in the room, but states and cities are all too willing to ignore it.

The ugly truth: Businesses are attracted to qualified workforces, not tax cuts. Of course, they're more than happy to take the tax cuts - to the extent they'll even threaten to leave - but corporations that require skilled workforces are going to go where the skill is at. That's just a fact. So, in a year when the city of Boston had to open up its piggy banks to the tune of $10 million to keep the schools afloat, the city is now going to hand over JP Morgan $2 million - just for the privilege of staying in the city. All that, and JP Morgan wasn't even threatening to leave the state - one of their high level people admitted as much in the Globe.

If JP Morgan is going to relocate its offices in the Commonwealth of Massachusetts, how many people think they'd actually leave the city of Boston? If they want a talented workforce, they're going to go where the most talent is - which is in Boston, because of its Universities and public transportation. Unfortunately, Mayor Mumbles Menino was duped again.

How many more times will cities and states fall for this? And when will politicians learn that job growth comes from new, small companies - not these mega corporations owned from afar. Shareholders of JP Morgan don't care about the city of Boston; Let's invest in the business owners who do. Those are the ones that'll stick around - because they live here and send their kids to school here.

It's difficult to worry about larger corporations, because they're going to do what they're going to do. Giving up the bank isn't a good strategy to deal with them, because half the time their threats are about as meaningful as pigs with wings. Kind of scary, but nonexistent. Meanwhile, if Boston would like to do something to help keep its major corporations here, why not institute policies that encourage what companies like JP Morgan truly want - policies that will keep a young, talented and highly educated workforce in the city. A better use of that $2 million would be on affordable housing, or making the T usable again. Let me know when the Mayor's office gets the Memo.

Sonia on LeftAhead!

Note: Sonia is the first in a series of candidates we're welcoming onto LeftAhead as the local election season heats up. If you're a candidate running for something and want to discuss the issues and the race with people who actually care, send me an email and we'll book you for one of our upcoming shows. We're looking forward to hearing (from) you.

Today, we had a very special guest, Sonia Chang-Diaz, on at LeftAhead. Lynne, Mike and I took up all kinds of issues during the podcast and asked Sonia for as many details as possible. Lots of tough questions and issue specifics were asked, and we got some pretty good answers.

Sonia is particularly thoughtful on the core issues facing urban areas such as education and housing; I also found what she had to say about taxes toward the end very refreshing. Lynne was at least slightly concerned about the new debt this state is taking on through the recently-passed (and soon to be signed) transportation bond bills. While Sonia hasn't made a cost-benefit analysis on the transportation bond bill yet, she also shares some of Lynne's worries. Here's a window to Sonia's soul re: tax philosophy.

I always look with a weary eye on taking on debt. How does our tax policy work? One thing we [at the Massachusetts Budget and Policy Center] always try to get out there and give people a good grounding on is the theories of fairness that are generally recognized when talking about tax policy... one of the theories is the 'use principal' - the idea that the people who use the goods should pay for them. Generally speaking... the use principal is not the fairest... I think it would strike people silly to structure a system that only the people who use a police system should pay for it... if you get mugged, you're charged a fee. That's not how the public system should work.

That's why generally the use principal is not one that should be our guiding principal when talking about taxes. But, the big exception to that ... is longterm infrastructural costs - for things like roads, bridges... that are going to be used over multiple generations in a state, where in no cases does it make sense to share costs across time and not just across the population that currently exists as a state.

Pretty nice drapes on that window, huh? If only the Republicans in D.C. got that principal on things like a certain war in a certain part of the country which is being bought and paid for by people my age (23) and younger, maybe the world would be a better place. Sometimes a bond bill makes sense - and I've actually come out in favor of Governor Patrick's bond bill, because in the long run doing these projects now will save money (and lives) over inflation in the long run. But we need more thinking on Sonia's line, as a whole, across the state and country. With that, she made for a very nice guest and I'm hoping people will listen.

Also: Included in the tags are all the issues we hit on the show.

Tax Credit Nightmare

MassBudget created a brief the film tax credit bill just passed through the state. It doesn't look good. I'm not opposed to offering incentives to help bring companies into Massachusetts - but tax credits don't seem to be the way to go. First off, what normal citizen gets tax credits for anything? No one does. We get tax deductions. MassBudget explains the difference quite well in the link above, but suffice it to say a tax deduction just reduces the overall taxable income, while a credit is a government check sent right to Steven Spielberg. There's a few things that stink about that, but mainly this: the film industry can get tax credits even if they don't pay a dime in Massachusetts taxes. To be eligible for the tax credit, all film companies have to do is film part of a movie in Massachusetts and send the Commonwealth the bill for their time spent here - and, in these difficult economic times, we'll credit the film industry 25% of their total costs, without any guarantee of making even a fraction of the costs back. 25%, by the way, is way beyond what normal Massachusetts tax credits go for - others are far more reasonable, at around 3-5%.

None of this would be a big deal, of course, if this were going to be a net-positive for the state of Massachusetts - if we'd earn enough in new taxes to at least break even. We won't.

But could the tax credit pay for itself by increasing economic activity and associated state tax revenue? A recent report by the state Department of Revenue examined this possibility. The report estimated that the total tax revenue forgone in 2006 to 2008 would be 137.7 to 238.7 million. It then examined how much of this loss could be offset by new tax revenue. The findings... suggest that it is u nlikely that more than a small portion of the forgone revenue would be offset by new revenue. This analysis is consistent with other studies on film tax credits.

Again, this all stinks. This bill is going to cost this state tens of millions a year, without even keeping an industry inside Massachusetts. Outrageous. If we want to spend this kind of money to spur economic growth, can't we be more intelligent about it? More tax credits for local businesses would help new, often middle-class entrepreneurs deal with upfront costs and grow the economy in every region we want in Massachusetts. Those incentives could be set up for certain industries, as well, giving incentives not only for new startups, but also for new startups all across the state, naturally located for where they could do well.

If Beacon Hill wants Massachusetts to become a Little Hollywood - fine. But, my god, this kind of a tax credit isn't the way to do it. A tax deduction, on the other hand, makes sense for a number of reasons, even if it was up to 25% or more. First, we're not resorting to corporate welfare by giving a government handout to Hollywood, while we would never do anything so kind to the people struggling to get by in this state. Second, if a company actually wanted that 25% deduction - and I'm sure some out there would - then it would have to come to Massachusetts and build their studio here to get it. In other words, it would have to pay Massachusetts taxes.

Maybe if the times weren't so dire, we could afford to give free government handouts to large corporations that aren't even pretending they'll locate here. But, the fact of the matter is times haven't been worse, probably in the 23 years and 11 months I've been on this Earth. That doesn't mean we shut down our efforts to create economic growth and new opportunity - between the Life Sciences bill and the Renewable Energy bill, it's clear this state is making good on its promises to promote economic growth. The Film Tax bill is another decent idea to attracting a broader economy to Massachusetts - but we need permanent business, not just an extra film or two to do their shooting here, so they can write off their expenses and bill the good people of Massachusetts. If film studios are willing to locate serious assets here and pay taxes toward Massachusetts, and hire Massachusetts employees who will pay Massachusetts income taxes, then it's worth giving a tax break - but even then, not a massive giveaway.

All Revenue Generation Postponed...

Ugh. I can't say I'm surprised, but I'm just looking forward to get this vote over with. We need more revenue now, and Beacon Hill must act on these issues soon.

Action Alert: Corporate Taxes Cut April 8th

The Coalition of Social Justice sent a very important email.

Next Tuesday (April 8), the House is expected to vote on a proposal that would close corporate tax loopholes and cut the corporate income tax rate by 25% - costing $466 million!

The Speaker of the House, of course, is billing this as a great compromise: he agreed to cut corporate tax loopholes, but his "compromise" is so generous to Big Business that their taxes will be slashed an amount no ordinary citizen would ever be so lucky to receive.

It gets even worse.

Meanwhile, 103,000 corporations pay the minimum corporate tax of $456...while the average Mass. family pays $2700 in taxes. The proportion of state and local taxes paid by corporations in Mass is way below average - 42nd in the country! This is not fair!

Amen! The economic times are so bad - and getting so desperate - that my hometown of Swampscott is about to cut all of the high school's technical education classes. This comes one year after they shut down the best elementary school in the district, which consistently performed in the top 10 schools on the Massachusetts MCAS and was one of the state's few Compass schools. But it's okay to cut corporate taxes now?

It's good to see the Speaker willing to compromise on Governor Patrick's best ideas, and propose a few good ones of his own - from life sciences to renewable energy - but this just isn't good enough. We, as a state, are facing a billion dollar hole next year - and none of the politicians seem willing to do the courageous thing and raise taxes, even by a tiny fraction. Something's gotta give and so far it looks like only the middle and working class is the one sacrificing. Not good enough.

Contact your legislators. Tell them to make sure corporations in Massachusetts pay their fair share - that's all, just their fair share. We have real problems now and cutting corporate taxes isn't the solution. Enough is enough.

Grow a Spine, Governor Patrick

I worked damn hard to get Governor Patrick elected, only to see him become a completely different Governor than he was a candidate. This is not acceptable.

Governor Deval Patrick will propose a gradual reduction in the state's corporate tax rate from 9.5 percent to 8.3 percent when he unveils his budget next week, a bid to win business support and jumpstart his stalled plan to tighten what he calls corporate tax loopholes, administration sources said.

As the Governor well knows, Massachusetts corporations and large businesses enjoy some of the lowest taxes in the country. We have tax policy that results in companies like Walmart costing us more money than we tax them. If I wanted a Governor who would cut corporate taxes, I would have voted for Kerry Healey.

It would have been nice to see Governor Patrick grow a coalition in the legislature to co-opt DiMasi's power, but instead we've only seen him introduce new policy after new policy, without the perseverance to stick with one. Now, we're seeing him bow down before DiMasi and plea for his proposals to pass, to the point where he'd actually give corporations a tax cut when our state faces a $1 billion dollar deficit. Like I said, this is not acceptable.

At the very least, if the Governor can't build coalitions, it would be nice if he had the guts to publicly spar with the Speaker, even if it meant shutting Government down. If that's what it would take to pass corporate tax loophole cuts and the Municipal Partnership Act, so be it. A huge percentage of the state would have enthusiastically supported him - and it certainly would have awoken the beast that was his army.

Yet, between his corporate tax cut proposal and casinos, I'm not sure if there's very many in his army left. He's supporting policies that are anathema to his base - why continue to support the home if it doesn't fit the foundation? Faith in the governor is quickly evaporating, like rain in the desert. Three years from now, Governor Patrick's seat is going to open up. If he continues along this path, Massachusetts will be welcoming Governor Charlie Baker. Sadly, at the rate things are going, I'm not sure if that's actually a bad thing.