Decision time for film tax credit

Beacon Hill lawmakers, who probably spent more than $300 million over the last four years trying to lure Hollywood filmmakers to Massachusetts, took a brief intermission today to consider whether the money was well spent.

The setting was a hearing before the Legislature’s Revenue Committee, but the stage was much bigger. Gov. Deval Patrick and a handful of lawmakers have proposed reining in the tax credit this year, either by capping the total amount issued or reducing the payouts for individual films, as well as stars like Tom Cruise and Mel Gibson. Most analysts believe any tinkering with the tax credit will scare filmmakers away from Massachusetts, so today’s hearing focused on the big picture and not the details of any particular piece of legislation.

Hundreds of people from the local film industry, most of them wearing yellow stickers saying FILM CREDIT EQUALS JOBS, turned out in force. The tax credit’s opponents were mostly policy wonks and officials representing teachers, municipalities, and mental health workers who believe the money going to the film industry could be put to better use funding state services.

Michael Widmer, the president of the business-backed Massachusetts Taxpayers Foundation, said he has seen all sorts of tax credits in his 20 years on the job. “This is probably the most costly tax credit with the least economic benefit,” he said.

Union officials representing Massachusetts film industry workers said the tax credit is doing exactly what it was intended to do, attracting filmmakers to Massachusetts and generating well-paying jobs. Union officials say their ranks have swelled over the last four years and the film workforce is growing, even in a down economy.

The film tax credit is an indirect state subsidy. Instead of paying money directly to filmmakers to shoot their movies here, the state gives them a tax credit equal to 25 percent of whatever they spend in Massachusetts for drivers, caterers, set designers, and other crew members — plus stars like Leonardo DiCaprio and directors like Martin Scorcese.

Most tax credits reduce how much tax a taxpayer owes, but the film tax credit is different. It can be converted into cash. The filmmaker can either sell the tax credit back to the state, at 90 cents on the dollar, or sell it to a third party, who can then use the tax credit to reduce his or her tax bill. Either way, it costs the state money.

According to an analysis released last year by the state Revenue Department, the state issued $166 million in film tax credits from the beginning of 2006 through the end of 2008. The Revenue Department estimated those tax credits generated a total of $676 million in spending in Massachusetts, including $429 million in wages for 3,177 full-time-equivalent jobs.

But of the $429 million in wages, only 18 percent went to Massachusetts residents. The remaining share went to nonresidents, and approximately $177 million went to big-name stars and directors from out of state who earned more than $1 million each.

Peter Enrich, a professor at the Northeastern University School of Law, said the state issued $113 million in film tax credits in 2008 and those tax credits yielded 1,196 jobs in the film industry. “Do the math,” he said. “That works out to $94,000 per full-time job.”

But if you include indirect jobs, those at businesses that cater to the film industry, the cost in 2008 drops to $62,000. And if the same analysis is extended to include 2006 and 2007, the cost per job drops to $52,250.

No big-name stars showed up to testify today, but there was still plenty of drama. Richard Cambria, a laid-off construction worker, said he landed a job as a prop maker two years ago on a film set and has been working regularly since, most recently on the Tom Cruise-Cameron Diaz thriller Knight & Day. He pleaded with lawmakers to reject a bill, filed by Rep. Steven D’Amico of Seekonk, that would scale back the film tax credit.

“Rep. D’Amico is preparing to take away my job. He might as well take my house, too,” said Cambria.

Film producers can shoot movies almost anywhere they want, so they tend to go where the money is best. Film producers can shoot movies almost anywhere they want, so they tend to go where the money is best. Massachusetts now has an attractive tax credit, but its supporters worry that even the governor’s proposal to cap the credit at $50 million a year could prove disastrous.

Dona Sommers, executive director of the New England branch of the Screen Actors Guild and the American Federation of Television & Radio Artists, says Rhode Island is having trouble attracting any films now that it has capped its state film tax credit at $15 million. She said producers won’t go to a state when there’s a chance other film productions could use up the available tax credit money.

Michael Mascio, a Martha’s Vineyard resident who was the producer on Spenser: For Hire the last TV series shot completely in Massachusetts, told lawmakers he plans to start shooting an ABC pilot here later this month called Boston’s Finest. He said the story was originally set in Chicago, but he is changing the script and moving production here to take advantage of the state’s tax credit and the quality film crews available locally.

Mascio says he is planning to spend $6.3 million in Boston on the pilot, which would generate a tax credit of about $1.5 million. If the pilot becomes a network series, he said he would spend $2 million per episode here. He said the spending is good for the state because a film or TV production makes few demands on state or city services, and everyone who works on the production pays taxes to Massachusetts. “We use the goods and services that exist and then we leave,” he said.

Without the tax credit, Mascio said, the TV pilot wouldn’t be shot here. “It will leave in a heartbeat if we don’t get this tax credit,” he said.

Rep. Jay Kaufman, the House chairman of the committee, wanted to know how long the state would have to keep paying for the tax credit before the local film industry could stand on its own without any subsidy.

No one seemed to know. Charles Merzbacher, an associate professor of film at Boston University, who opposes any tinkering with the film tax credit, said it can’t be done in three or even five years.

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Bruce Mohl

Editor, CommonWealth

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

About Bruce Mohl

Bruce Mohl is the editor of CommonWealth magazine. Bruce came to CommonWealth from the Boston Globe, where he spent nearly 30 years in a wide variety of positions covering business and politics. He covered the Massachusetts State House and served as the Globe’s State House bureau chief in the late 1980s. He also reported for the Globe’s Spotlight Team, winning a Loeb award in 1992 for coverage of conflicts of interest in the state’s pension system. He served as the Globe’s political editor in 1994 and went on to cover consumer issues for the newspaper. At CommonWealth, Bruce helped launch the magazine’s website and has written about a wide range of issues with a special focus on politics, tax policy, energy, and gambling. Bruce is a graduate of Ohio Wesleyan University and the Fletcher School of Law and Diplomacy at Tufts University. He lives in Dorchester.

The big question facing lawmakers is whether the state, facing huge deficits in the next couple years, can afford to wait it out.

Merzbacher said he talks with people in Hollywood regularly and says they are following the debate here closely. “They are somewhat skittish at this point,” he said.