Targeting the stars

Proposals would tweak film tax credit

Keeping tabs on Hollywood stars is becoming a favorite pastime in Massachusetts (Was that Bradley Cooper on the Common?), but some officials on Beacon Hill are starting to wonder whether the fun is becoming a bit too costly.

Gov. Deval Patrick is proposing to cap the state’s film tax credit at $40 million a year, a move that would save the state an estimated $40 million annually once it’s fully implemented.  Patrick says he remains a big fan of the film tax credit, but he acknowledges he occasionally hears reports that the credit is being used to subsidize questionable expenses, such as an “inflated bonus” for a movie star.

Rep. Tackey Chan of Quincy, an actor himself, is pushing legislation that would attack the star problem from a different direction. His bill would leave the tax credit intact, but shave 40 percent off its value if a producer fails to spend half of his payroll on local residents. The goal of the proposal is to give movie producers a financial incentive to hire more local actors and crew.

The film tax credit, equal to 25 percent of whatever a producer spends in Massachusetts, has succeeded in bringing a lot of movies to the state and laid the foundation for a fledgling industry with studios and other ancillary businesses. The rap on the credit is that too much of the taxpayer money is going to subsidize workers from out of state, in particular a small group of stars and directors.

From 2006 through 2010, according to the state Revenue Department, film productions paid out a total of $692 million in Massachusetts wages, with 38 percent of the money doled out in increments of $1 million or more to mostly out-of-state directors and stars. The remaining 62 percent of the money was paid out in increments of less than $1 million, with nonresidents snaring the lion’s share of the money. The precise wage split between residents and nonresidents was not included in the latest Revenue Department report on the film tax credit, but the split for overall production spending was 66 percent for nonresidents and 34 percent for residents.

Chan, who worked as an extra on Pink Panther 2, Fever Pitch, and a handful of other productions, favors his approach over the governor’s because it would encourage the movie industry to hire more local people. He said the last time a cap was proposed in Massachusetts, the uncertainty prompted Hollywood studios to steer clear of the state, sending production levels to their lowest level ever. The downturn was reversed only after a group from Massachusetts, including a top aide to the governor, flew to California and pledged to support the film tax credit.

Neither Patrick’s nor Chan’s proposal is likely to get too far in the House, where the film tax credit has the support of some of the top leaders. But the proposals are signs of growing unrest about a tax credit whose cost is expected to start rising quickly in the coming years.

One official involved with the local movie industry, who requested anonymity, said neither legislative proposal makes sense. He said the proposed cap will again scare off studios and cost the state a great deal of film business. As for Chan’s proposal, the official said, it is unnecessary because every studio wants to hire locally as much as possible to avoid having to fly in talent and pay for their accommodations.

The official said state leaders should leave the film tax credit alone because it is providing the seed money for an emerging industry. In Devens, for example, investors are building a $30 million studio on the assumption that the film tax credit will keep movies and television productions coming to Massachusetts.

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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.

Rep. Jay Kaufman, the House chairman of the Legislature’s Revenue Committee, who has raised concerns about the film tax credit in the past, said Chan’s proposal is interesting. “DOR studies over the years have raised very serious questions about taxpayers’ return on investment on the film tax credit,” Kaufman said. “The governor proposed capping it. I know from similar efforts over the last few years that it sends a signal into the marketplace that’s perceived by some as death by a thousand cuts. The proposal to proscribe investment in excessive salaries may be a reasonable alternative to an absolute cap.”

The Massachusetts Film Office, tasked to promote the state to movie and television producers, declined comment on either the governor’s or Chan’s proposal.