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How the Iowa Film Credit Pinata works
September 21, 2009
As the Film Credit Program grinds to a halt in a quagmire of mismanagement and corruption, let's review how this state-sponsored looting program works.
Films approved for the "half-price filmmaking" program get allocated a tax credit equal to 50% of qualifying costs (which seem to have included Mercedes and Land Rovers - "nothing was disallowed"). These are "transferable" credits. That means the filmmakers can sell them to raise money or cover their costs.
To get buyers for the credits, they have to sell them at a discount. It makes no sense to buy the tax credits unless they are cheaper than paying the taxes: a do-it-yourself tax cut. A little cottage industry of lawyers and accountants has sprung up to match well-to-do folks needing a tax cut and the film companies.
In economic terms, the state is allowing private filmmakers to discount the state's income tax receivables to finance their projects. It only differs from a straight subsidy by the general fund in that the money is spent before it is received.
So we have a well-lobbied industry that gets a taxpayer subsidy, a well-connected group of middlemen that make money doing the deals, and their clients who get to cut their tax bills. A sweet deal, except for the rest of us.
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Comments
I've blogged about this issue here in Louisiana on http://nolamotion.com It's a ridiculous system. We pay them to be our friend. That makes us Johns. In 2007 we paid $115m in cash to the film biz. That makes us investors, yet we get no piece of the action. This is how economic development works in the USA now. In Louisiana our nationally lauded conservative governor put up millions to keep a chicken plant running while refusing to take stimulus money for unemployment ($70M) and light rail ($300M).
Corporate welfare and plutocracy are the norm while the tea baggers shout down civil discourse and call the president a nazi. It's a topsy-turvy world.
Sorry Iowans are sharing yet another tragedy with us folks down the river.
Posted by: Nolamotion | September 21, 2009 2:32 PM