Pennsylvania provides tax credits for film production, concerts and video games. House Bill 1519 would combine these credits into one Multimedia Tax Credit Fund. But consolidating tax credits doesn't address the real problem of politically favored businesses receiving special handouts that don't stimulate the economy.
It’s seemingly self-evident that selecting certain industries for taxpayer assistance is unfair. Lowering a company’s tax bill to encourage job growth is a sound economic solution. But it’s a solution that should be applied across all industries—not just those deemed important by government officials.
In addition to the fairness problem, the effectiveness of tax credits is spotty at best. The film tax credit has an especially poor track record. Findings from a PublicSource analysis illustrate why:
- Pennsylvania productions received more than $116 million in tax credits. That’s more than one out of every five tax credit dollars, missing the program’s true intent to attract out-of-state productions.
- Few productions use the tax credit; productions sell 99 percent of all film tax credits to companies that have nothing to do with film or TV. Essentially, the film tax credit is a backdoor tax break for some of the largest corporations and utilities operating in Pennsylvania
- Film tax credit dollars are frittered away in those transactions. The program wasted more than $27 million of taxpayer dollars by allowing credits to be sold to non-film companies, such as Apple. Secondary tax brokers also received thousands in fees from each transaction because of this arrangement.
PublicSource isn’t the only critic of the film tax credit. A 2013 Independent Fiscal Office (IFO) report found flaws with the tax credit program as well. For instance, nearly 70 percent of film production-related expenses went to out-of-state residents. In other words, a large share of the benefits accrued to non-Pennsylvanians. Most importantly, the state recouped just 14 cents in related business activity for every dollar spent on the program.
Lawmakers considering ways to balance the budget should end the film tax credit and other credits identified in CF’s list of corporate welfare programs.
With a $1.4 billion budget shortfall, lawmakers must end failing economic development programs to balance the budget and prevent tax hikes on working Pennsylvanians.