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Film credits, hayseeds and sophisticates

October 20, 2009

The Wall Street Journal editorial page picks up on Iowa's film credit fiasco:

Iowa's program lured Tinsel Town with a whopping 50% tax credit for production costs in the state—payroll, food, living expenses. They even let the Rodeo Drive tax refugees apply the credit to the purchase of a car. In this field of schemes, one director bought a new Mercedes. Iowa's cash for clunkers.

Hey, didn't somebody point that out awhile back?

Now the Iowa program is falling apart amid allegations of weak oversight and abuse—the usual problems that occur when a tax system loads up its survival on loopholes. Iowa's Democratic Governor Chet Culver has temporarily suspended the tax-credit program, asserting, "Iowans will not be taken for suckers." We knew that, but what about Iowa's politicians?

An entertainment lawyer comments on yesterday's WSJ news article; he seems to think we rubes are just being too sensitive:

In reading the article, it seems that everyone was probably acting within the technical limits of the law. No one has claimed that these expenditures were not allowable under the program. However, having the state pay for half of a film producer's Mercedes clearly went against the local sensibilities. This isn't about math or money as much as it is about a clash of cultures. It's like inviting a rock musician or famous athlete over for dinner. You're very excited until you see what they're really like, and then you can't wait for them to leave.

That's not quite right. Credits were claimed for the costs of brokers selling the credit. Other credits were claimed for expenses clearly labeled as non-Iowa expenses -- only Iowa expenses qualify -- without even running them through an Iowa strawman. And over $6 million of credits were granted for expenditures that were never actually made with money. Iowans actually seem to like having the movie stars around. We're just not crazy about paying $121 per Iowan for the privilege.

Now it appears at least one movie maker is running to Michigan to take their money, demonstrating that the only way we'd ever have a film industry permanently is to give it permanent subsidies.

The WSJ editorial page gets it right:

The larger issue beneath the Iowa fiasco has to do with using tax credits as a policy tool. Almost without exception, we think tax credits are bad policy.

Related: Let them eat Canapes.