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But what about Brad Pitt's economy?

October 13, 2008

There's nothing like a financial catastrophe to focus your spending priorities. Some states are pondering whether financing Hollywood projects is the best way to spend their shrinking tax revenues, according to the New York Times:

Already on the hook for billions to bail out Wall Street, taxpayers are also finding themselves stuck with a growing tab for state programs intended to increase local film production.
One of the most shocking bills has come due in Louisiana, where residents are financing a hefty share of Brad Pitt’s next movie — $27,117,737, to be exact, which the producers will receive by cashing or selling off valuable tax credits.

These giveaways are purported to be needed for "economic development." Louisiana's credits have spurred economic development in that state's special tradition:

Until two years ago, Louisiana’s program offered a 15 percent credit for virtually the entire budget of a qualified film (and more for Louisiana resident wages), including money that may have been spent out of state. Things were fast and loose enough in Louisiana that Mark Smith, who oversaw the program, pleaded guilty last year to taking $67,500 in bribes to inflate budgets for a film production company that was not named by the authorities.

Of course Iowa has two separate 25% credits - one for expenses in Iowa, and one for investors in Iowa film projects. These credits can be transferred, so they are sold at a discount to raise project funds. If they are sold at a 10% discount - a typical rate - a $20 million project can get $9 million to the moviemakers while costing Iowa taxpayers around $10 million. Iowa also offers income and sales tax exclusions to vendors involved in film projects.

Michigan, at least, is slowly wising up:

Michigan, its own budget sagging, is in the middle of a hot political fight over a generous 40 percent rebate on expenditures to filmmakers that was carried out, with little opposition, only last April. Producers of films for studios like Warner Brothers and the Weinstein Company rushed to cash in, just as homegrown businesses were squeezed by a new business tax and surcharge. Rebellious legislators from both parties are now looking to put a cap on the state’s annual film spending, which some have estimated could quickly hit $200 million a year.

You mean Clint Eastwood's projects aren't the biggest problem in Michigan nowadays?

Via The TaxProf.

Tags: corporate welfare.economic development.