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Harold Hill's Film Credit Follies: where we stand one week later

September 25, 2009

At 4:56 p.m. one week ago, the Iowa Governor's office issued a press release putting out the first word of how an obscure tax credit has become what one commenter calls, without overstatement, "among the most expensive mistakes in our state's history." A program touted as being way to "create jobs" for Iowans was revealed to be funding luxury cars for film producers and large cash payments to members of the producer's families. None of the films financed by the "half-price filmmaking" program had adequately documented their expenditures, and only two had even turned in receipts.

As the scandal unfolded, we learned that the Iowa Film Credit program may have created a liability of $363 million, or about $121 per Iowan, thanks to $200 million of applications rushed through in the two months before an annual cap took effect. The Attorney General has discouraged hopes that the state can weasel out of the liability. Three top officials are out of their jobs, the Governor has suspended the program, and filmmakers are irate that they aren't getting their free money as fast as they want it.

Now the optimists among us are hoping that Iowa is finally taking a hard look at it's rats nest of tax-credit corporate welfare programs.

The politician reaction to the potential transfer of $363 million from Iowa to Hollywood is weirdly low-key. That's because almost all members of both parties in the legislature voted for the disastrous film credit program or otherwise supported it. They have to find a way to be outraged without pointing the finger at themselves.

Republicans mostly try to pull this off by blaming mismanagement and calling for investigations, ignoring their role in setting up the programs. The official blog of the Iowa Republican party has only a tepid indirect reference to the scandal:

Today Republican Party of Iowa Chairman Matt Strawn issued the following statement criticizing Governor’s Culver’s repeated lack of leadership on critical issues, including oversight of the Department of Economic Development.

One frustrated Republican blogger says that failure to speak out against the film credits could be politically fatal. I think he's right.

Democrats, when they say anything, talk of reining in all of the state's tax credit programs, wisely avoiding the issue of the obvious mismanagement of the program. For example:

A long-time critic of state tax credits welcomes the new scrutiny that’s being focused on all tax credits, courtesy of a controversy in the Iowa film office.

Senator Joe Bolkcom, a Democrat from Iowa City, is the chairman of the Iowa Senate’s Ways and Means Committee which writes and reviews state tax policy. Bolkcom says state tax credits had been on “automatic pilot” until this past spring when the governor and legislature put some “caps” or limits in place on several credits.

Of course this "long-time critic" voted for the unlimited film credits when they were first enacted; only three of the 150 legislators voted "no," making the film credit fiasco awkward on a bipartisan basis.

It would be a great time for a bold politician to say that the state's tax-credit/corporate welfare system is a disaster that should be scrapped in favor of a repeal of the corporate income tax and and a broad-based, low-rate simplified individual income tax. It hasn't happened.

It's almost certain that there will be more embarrassing revelations about this and other tax credit programs. While the politicians are dithering now, events won't let that continue.

Link: Tax Update film credit coverage.