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Legislative report says repeal film tax credits. Finally!

Legislative report says repeal film tax credits. Finally!
Credit: Veep's Facebook page.

It's been 11 days since news broke that the Maryland Department of Legislative Services has given the state's film tax credits an enthusiastic two thumbs down. The draft report, dated Oct. 31, made its way to the DCist, the Washingtonian, CBS (in DC), and the National Review online without a word coming out of The Sun.

The tax breaks—$62.5 million so far, with 96 percent going to "Veep" and "House of Cards"—ought to be repealed, the Legislative Services concludes. They are a drag on the state budget, masked by opaque accounting, tax secrecy, and Hollywood hype. We said as much before, last February, when "House of Cards" was threatening to take its ball and go home.

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At that time The Sun (which had directly profited from "House of Cards" by renting a set to it) had editorialized in favor of the breaks. By April, the editorial board was cautiously rethinking the matter: "The Department of Legislative Services is set to study the issue and report next summer—a timetable that will not affect filming of the next season of 'House of Cards' but could say much about the future of the tax credit, which is set to expire in 2016. Such an objective examination is overdue."

Now the 69-page draft is downloadable for all to see (it's a PDF), and The Sun's take is arguably overdue. There is supposed to be a public hearing in the next couple weeks about it. The report's highlights will be gratifying (and unsurprising) to anyone whose bread is not directly buttered by the scam:

  • "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."
  • "DLS recommends that the General Assembly allow the film production activity tax credit to sunset as scheduled on July 1, 2016."

The report then goes on to list reforms that might do in case the legislature doesn't repeal. Claw back breaks from productions that run away, for instance. Have the DBED administer it instead of the Comptroller, who is bound to keep the productions' books a state secret. For God's sake, make the thing a tax refund, based on taxes owed, rather than a rebate of the production's stated costs.

Expect a lively debate in the legislature.

But really. This has never been a matter about which there can be interesting debate because all the logical evidence resides with those who would end the practice. As the report states, most tax credits begin with the idea that a market failure has left the world with an inefficient outcome that can only be remedied by government intervention, but in "contrast to other business tax credits, the film production tax credit does not clearly identify an efficiency or outcome goal in its intent."

The only interesting conversations to have, then, are, "Where do we find and when can we tar and feather the mountebanks who needlessly gave $60 million away?" and, less fun but more important, "How can we make our tax system more ideal and efficient by taxing broadly and lightly?"

A few other states are getting hip. The report says only 37 states (plus D.C.) now offer film incentives, down from 44 in 2009. Idaho, Arizona, South Dakota, Kansas, Missouri, Iowa, Tennessee, Indiana, and Wisconsin have all gotten out of the game in recent years. And that last one is telling because Wisconsin was among the most overboard. The state offered 25 percent on production costs plus 15 percent on "infrastructure," for a practical total of 40 percent. Taxpayers were directly paying basically all in-state production costs for movies like "Public Enemies."

It was like paying Johnny Depp $4.6 million to make an appearance.

And for a minute, Wisonsin's example was the one that film-credit adherents touted. Virginia's is still a 40-percent refundable rebate, though it's capped at a statewide total of $5 million—small beans in the world of "VEEP" and "House of Cards."

Productions like that are now hooked on subsidies. They'll almost certainly alight for more lucrative pastures if or when Maryland comes to its legislative senses.

We'll be sorry to see the glamorous freeloaders go. And it's damn unfair that the hundreds of skilled production people hereabouts have been forced to rely on this batshit twisted incentive system in order to get any work at all within commuting range. But enough is more than enough. With a little push and a little pull, maybe the other 30-odd stupid states will cut out the batshit too, leaving the field level once again for honest work and straight accounting.

We await The Sun's wisdom on this matter with great anticipation.

Click here for more from Edward Ericson Jr. or email Edward at eericson@citypaper.com

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