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Film spending flows mostly out of state
222 jobs for Mass. residents cost the state $325,000 apiece
January 11, 2011
The state’s film tax credit generated $319 million in new spending on movies, TV shows, and commercials in 2009, but only a third of the money went to Massachusetts residents or businesses, according to a long-delayed report from the Revenue Department.
Of the $195 million paid out in wages, 78 percent went to nonresidents, with $82 million going to a handful of actors like Tom Cruise who earned more than $1 million per production.
The Revenue Department said 222 of the 586 film industry jobs went to Massachusetts residents at a cost to the state of nearly $325,000 apiece, although state officials said that figure is inflated somewhat because the cost includes tax credits issued in previous years but not cashed until 2009.
The Revenue Department estimated the film tax credit caused spending to increase in Massachusetts in 2009 by $32.6 million, boosting the state’s gross domestic product by $167 million. But state government lost a lot of money on the credit. The state collected 13 cents in new tax revenue for every dollar it spent on the film tax credit, the report says.
The disappointing numbers are sure to rekindle the debate about the state’s ability to use tax credits and grants to spur economic development, particularly at a time when Massachusetts is facing a budget gap of more than $1.5 billion. The release of the film tax credit report coincided with an announcement by Evergreen Solar that it was closing its plant in Devens and letting go 800 workers over the next few months to cut costs. The state had provided more than $58 million in state aid to the solar company to help it open the facility on the former military base.
Greg Bialecki, the state’s secretary for housing and economic development, said he was not frustrated by the disappointing news on Evergreen and the film tax credit. He said state officials will be looking for ways to get more bang for each buck spent on film tax credits and characterized the plant shutdown by Evergreen as the sort of thing that can happen when states try to kick-start economic activity.
“I don’t find it frustrating because we knew that nothing was guaranteed,” he said of the Evergreen announcement. “If you’re going to try to take some bold steps to get the economy going, you’re not going to bat 1,000 all the time.”
The state’s investments in Evergreen were an attempt to help a company launch a Massachusetts manufacturing facility in the highly competitive solar panel industry. By contrast, the state’s investment in film tax credits represents an attempt to launch a new industry in Massachusetts.
Now in its fourth year, the film tax credit offers producers who film in Massachusetts tax credits equal to 25 percent of whatever they spend. The tax credits are refundable and transferable, meaning they can easily be converted to cash by selling them back to the state or to another taxpayer.
The Patrick administration is divided on the tax credit, with budget officials worried about the low bang for the buck and economic development officials hopeful that the tax credit will eventually translate into an on-the-ground, year-round business. Twice over the last two years the administration has sought to scale back the film tax credit. One effort went nowhere and the other was approved, only to be erased as state officials backpedaled in the face of opposition from the producers of the Tom Cruise film Knight & Day, which was scheduled to start shooting in Massachusetts.
Bialekci said the Patrick administration is seeking ways to steer more film jobs to Massachusetts residents, and he didn’t think the tax credit would be scrapped. ”We still think that the film tax credit is an important tool to help grow a new industry in Massachusetts,” he said.