Tom Cruise stars in Beacon Hill budget thriller

Talk about star power: The fear that a Tom Cruise movie might decamp Massachusetts for Georgia prompted Beacon Hill lawmakers and Gov. Deval Patrick to flip-flop on a proposal to reduce the cost of the state’s film tax credit by $20 million.

The flip-flop was particularly embarrassing for Patrick, who included the $20 million change in the revised budget he filed in early June. The House and Senate both went along with the proposal, and it became law on Monday when Patrick signed the state budget legislation  But moments later Patrick restored the film tax credit to its original form by signing a separate spending bill that repealed the $20 million savings initiative.

A spokeswoman for Leslie Kirwan, the governor’s secretary of administration and finance, who crafted the tax credit change, said she needed to look into the issue further before commenting.

“I’m glad that we fixed this,” said Rep. Ronald Mariano of Quincy, the assistant House majority leader. “The film tax credit has worked here in Massachusetts.” He added: “It would be really foolish of us to put anything into the legislation that would hurt that effort.”

The state’s film tax credit is one of the most generous in the nation. (See “Subsidizing the Stars”) It offers producers a 25 percent tax credit on all payroll and production expenditures in Massachusetts and also exempts most of a film company’s purchases from the state’s sales tax, which was raised on Monday from 5 to 6.25 percent. In essence, for every dollar a film company spends in Massachusetts, it receives a credit worth 25 cents that can be converted into cash, either through a direct payment from the state or by selling the credit to anyone who owes taxes in Massachusetts.

The Patrick administration in early June filed a revised budget that proposed capping at $2 million the amount of any star salary that would qualify for the tax credit. With big budget movies lining up to shoot in Massachusetts, including an action comedy called Wichita starring Tom Cruise and Cameron Diaz that the Boston Globe has reported would be the biggest movie to ever film here, administration officials estimated the change would save the state $20 million in the coming year.

With Beacon Hill budget officials scrambling for revenues to ease the pain of steep cuts in local aid and state services, the change in the film tax credit was swiftly adopted by both the House and Senate.

But Mariano says lawmakers then began hearing from members of the Screen Actors Guild that the producers of the Cruise movie weren’t happy with the tax credit change and were thinking about taking the film to Georgia. It’s unclear what the status of the movie is currently.

Efforts to reach the producers and Nicholas Paleologos, who heads the Massachusetts Film Office, were unsuccessful. In a previous interview, Paleologos said capping how much of a star’s salary would qualify for the tax credit would hurt the state’s ability to attract big budget films because big budget films are usually headlined by big budget stars.

At any rate, the House last Thursday came out with a new draft of a supplemental spending bill for fiscal 2009 that effectively repealed the tax credit change contained in the state budget. Several House members said they had no idea the change was included in the legislation because the bill merely said House No. 4129 — the number of the state budget legislation — “is hereby amended by striking out sections 28, 46 and 158.” Those sections contained the $2 million cap on star salary tax credits.

Mariano said the $2 million cap was a mistake. He said the state sometimes needs to spend money to make money and noted that if the Cruise movie ends up going to another state, Massachusetts will end up with no jobs and no film spending here. “How much are we recouping then?” he asked.

Repealing the $2 million cap had nothing to do with proposals to build movie studios in Weymouth, which is part of Mariano’s legislative district, and Plymouth, which is part of Senate President Therese Murray’s district, Mariano said. “One has nothing to do with the other,” he said, although he conceded a successful tax credit is needed to attract film producers to the proposed Massachusetts studios.

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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.

Sen. Richard Tisei, the Senate minority leader, said Patrick did the right thing when he capped at $2 million the amount of star salaries that would qualify for the tax credit. He said he didn’t know why Patrick flip-flopped on the issue, but said it’s all about money. “Probably some big shot Hollywood executives called up and threatened to stop making movies here,” he said.

The Patrick administration for weeks has been sitting on a Revenue Department report laying out the cost of the state’s film tax credit.