Battle report from a skirmish in the state tax policy wars. I was in Scottsdale Friday to join Joseph Henchman of the Tax Foundation to talk about state film tax incentives. We were on a panel with three advocates for incentives — two from the film industry and one a retired head of a state film office. Our audience was a panel from the National Conference of State Legislators, mostly legislators heading state taxwriting committees.
Joseph did a nice job explaining that all of the studies not financed by the film industry show tax credits for films to at best an inefficient way to create jobs, and at worst job killers when other possible uses for the funds are considered.
The incentive boosters were big on stories, about all the jobs “created” by taxpayer money, all the happy stories of communities getting together to make a movie, and so on.
My role was to tell a different story — the story of Iowa’s embarrassing and disastrous Film Tax Credit program. I told how the Iowa legislature enacted the program, with two different 25% transferable credits, with little debate and almost no opposition (three “no” votes out of 150 legislators) in 2007. By 2009, film trucks were everywhere and the local paper was running fanzine-like articles gushing over the “sightings” of celebrities.
But trouble was brewing. By spring 2009 the legislature was realizing that they had enacted an open-ended subsidy that threatened their ability to do anything but fund Hollywood. About the same time a tipster sent a letter to the Department of Economic Development saying a filmmaker was bragging around Los Angeles about how she was making money through the “Half-price Filmmaking” program, using pretend expenditures to get tax credit funding well in excess of her cost in making (bad) movies. An audit was commissioned, and soon the program collapsed in disgrace when the audit revealed amazing mismanagement and breathtaking looting of the program. A follow-up audit by the state auditors office showed that 80% of the credits that had been granted were either improper or fraudulent. Good times.
The Tax Foundation crew was impressive. Joseph and his Tax Foundation colleague Elizabeth Malm seemed to know every legislator. Joseph seemed to be aware of every detail, even correcting my posture as I sat listening to the questions. I think he was a little concerned I might be a loose cannon and go off on the legislators; I can’t deny the temptation, but I knew that wasn’t my place.
The legislators agreed to set up a panel on setting standards for evaluating the cost-effectiveness of tax incentives. That’s a better response than I expected, and I hope something comes of it.
Only time for a few quick links today.
Robert D. Flach starts the short holiday week with a special Monday Buzz!
Russ Fox tackles the important question: Would the Proprietors of “I Married an Idiot” Commit Tax Fraud?
Peter Reilly, Should President Obama Offer Amnesty For Legal Residents Behind On Taxes? I think he should offer a blanket amnesty for Americans abroad enmeshed in the FATCA/FBAR nightmare.
Paul Neiffer, Take Advantage of Low Rates! Low IRS minimum interest rates, that is.
Robert Goulder, Magnum Opus: “Paying Taxes 2015: The Global Picture” (Tax Analysts Blog)
Hauqun Li, An Introduction to Forms of Business Organization and Taxation (Tax Policy Blog)
TaxProf, The IRS Scandal, Day 564