A controversial state tax credit for the film industry has proved once again to be invincible.
The Legislature rebuffed efforts by Governor Charlie Baker to kill the subsidy. The governor had wanted to use the savings to finance an expansion of a tax credit for low-income workers. Like his predecessor Deval Patrick, Baker had criticized the film tax credit as a wasteful giveaway that did not generate enough economic activity in Massachusetts to justify the tens of millions in revenue lost to the state treasury. “My view has been that the subsidy is not worth the value of the return,” Baker said Wednesday. “There are clearly people in the Legislature who disagree with me, but, as I said before, that’s politics. That’s government.”
Baker’s loss, though, is a coup for the thousands of film workers and related professionals who said its elimination would disrupt the burgeoning industry and threaten their livelihoods. They organized a lobbying campaign that included testifying at public hearings, social media call outs, and personal appeals to legislators. It didn’t hurt that those workers had a well-placed supporter in their corner: House Speaker Robert DeLeo. “We feel that it’s good business,” DeLeo said Wednesday as the Legislature wrapped up negotiations on the state budget for fiscal 2016, which began July 1. “I know I’ve talked to small businesses throughout the Commonwealth who say when films are made in that particular district, how valuable they can be.” The Massachusetts film tax credit equals 25 percent, with some exceptions, of the costs and salaries for films, commercials, and television shows shot in the state. Under Patrick, the Department of Revenue issued a series of reports concluding that the film tax credit did not yield much economic benefit. For example, Massachusetts paid out an estimated $77.8 million in credits in 2012 that generated $304 million in spending by movie, television, and advertising productions. However, the department said, two-thirds of that spending took place outside of Massachusetts; $101 million occurred in the state.
From 2006 to 2012, the program created the equivalent of about 5,500 jobs, the tax agency said, but each job cost the state approximately $118,000. In that time, the state doled out almost $411 million in film credits. But some in the industry said the state’s analysis does not reflect the reality at their companies. Brian Drewes said business generated by the tax credit helped his visual-effects company, Zero VFX, grow from a small operation in a Newton basement to a 12,500-square-foot space in the Back Bay, with 55 artists working on films and commercials.
“What you see is a groundswell saying that this does have an economic impact on the city that is beyond what the Department of Revenue reports like to mention,” he said. “When you actually start to track reality, you see all the people with stories like mine.” Baker, meanwhile, took a different tack from Patrick’s to kill the film subsidy. He proposed linking it to the state’s earned income tax credit, forcing lawmakers to choose between Hollywood producers and celebrities or hundred of thousands of low-income families.
The Legislature didn’t bite, choosing instead to eliminate an obscure tax break for large corporations to finance the governor’s expansion of the earned income credit, which partially offsets taxes for working families. One reason may be just how well residents who work in the movie and commercial industries fought back, using the website SaveMAFilmJobs.com and the hashtag #savemafilmjobs to generate support.
“They have many good stories to tell, and they have spent their time telling their stories because they want to . . . educate their elected officials and other people on the value of the program,” said Chris O’Donnell, business manager of the International Alliance of Theatrical and Stage Employees, Local 481, whose membership of film workers has tripled over the past seven years to 900. “What’s happened in the last few months is a grass-roots effort.”
Peter Enrich, a Northeastern University law professor who specializes in tax incentives, said a strong economic argument against the tax credit was no match for such a concerted political campaign. “It’s very hard for the legislators to sit and look at a room full of people who say their job is on the line and then look at a small group of people with expertise who say this is an inefficient way of providing economic support,” Enrich said. “The problem is, it’s way too expensive to be justified . . . It’s just totally bonkers.” A state senator who opposed the film tax credit said he will continue pushing to limit the scope of the program, hoping to cut the costs in half to $40 million per year. Senator Jamie Eldridge, a Democrat from Acton, said he wasn’t persuaded by the personal pleas from many in the industry to save the credit. “As a legislator,” Eldridge said, “I’m not here to make policy decisions based on anecdotes, but data.”