House of tax incentives [Editorial]

From afar, the recent dramatics involving "House of Cards" and the size of the film tax credit it receives from Maryland have offered intrigue worthy of a Hollywood-produced political thriller like, oh, "House of Cards." The producers threatened to leave, some legislators threatened to seize property, and when the dust cleared in Annapolis, the overall budget for the film tax credit stood at $3.5 million less than supporters wanted.

Now that a deal has been struck for the popular Netflix TV series to return to shoot a third season in Maryland, the episode has raised an important question: Is spending so much money to attract or retain film or television productions worth the expense? There are reasons to be skeptical.


First, a disclosure. The Baltimore Sun has benefited directly from TV and film spending, most recently receiving rent payment as a location for "House of Cards" as its "Washington Herald" set. We have witnessed first-hand how such a production creates a veritable army of well-paying jobs down the supply chain from technicians to caterers, extras to truck drivers and many more. It's clear that it and other entertainment productions have allowed the Baltimore area to train and employ hundreds of talented people working in that industry. It would be advantageous to keep them working in Maryland, and episodic television is considered the most desirable of all possible employers.

Nevertheless, it's doubtful the average person realizes just how generous Maryland's tax credit program is (although it's typical of the incentives that 40 states and the District of Columbia now offer to attract such productions). Indeed, "tax credit" would seem a misnomer, as the program essentially works as a refund — producers get back up to 27 percent of the qualified in-state production costs of a show like "House of Cards," mostly as a credit toward the wages, goods and payments to local vendors after they've finished shooting. For that show alone, the total rebate pledged or allocated so far sits at $30.9 million, according to a recent Department of Legislative Services report. The HBO show "VEEP" is not far behind at $22.8 million in tax credits.


The industry claims it's well worth the cost — and they've paid for various studies to prove it. The Maryland Film Office estimates the total economic impact from the two TV shows amounts to $170 million annually. State officials say thousands of jobs have been created from direct and indirect spending on those productions. There are plenty of places that pay more — covering 30 percent or more of costs in states like Louisiana, Missouri, Oklahoma, Mississippi and Alaska.

The economic claims sound good. But we'd like to see them verified by a more objective authority. And here's the other lingering question: What if Maryland instead appropriated that same money to an industry with better long-term prospects, like cyber-security? With the presence of the National Security Agency at Fort Meade and concerns for Internet privacy and safety at an all-time high, the state appears uniquely poised to be at the center of a high-growth, global industry with a payoff far beyond a TV show or two. The O'Malley administration has already taken some steps to promote cyber-security, but what about taking another $15 million worth?

Such a choice needs to be made dispassionately. It's telling that when the lobbyist working for Media Rights Capital wanted to win over members of the General Assembly, he didn't call on a team of accountants but on actor Kevin Spacey (aka the fictional Francis "Frank" Underwood). If Maryland wants a TV show as a public relations vehicle, that's one thing. (Although as the case of "The Wire" proves, not all publicity is good publicity.) But this is a matter of smart investment choices, not who can pose for the best Facebook selfie.

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. If the debate over "House of Cards" proved anything, it was that the entertainment industry runs on cold, hard numbers; Maryland ought to do the same.

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