Film Incentive Script Is the Same: Confuse Public

Film Incentive Script Is the Same: Confuse Public

from: Stop-Runaway-Production.com

In New Mexico & Saskatchewan, Film Incentive Script Is the Same: Confuse Public

An article in “The Santa Fe New Mexican” recently caught my attention.  As I have stated in recent posts, it is becoming more and more apparent that debating film incentives may be a waste of time if it can be rendered unnecessary by educating people about how state film incentives actually work. In my experience, when people understand that film incentives operate as direct cash funding from public coffers for film and TV projects rather than a simple tax reduction, support evaporates.

It has also become clear that many promoting the film industry don’t want you to understand how film incentives work.  In New Mexico, one of the ways film backers keep the public confused or in the dark is with simple word choice. New Mexico film backers call the incentive a “tax credit” and critics call it a “subsidy”:

Is it a “subsidy” or a “tax credit” when New Mexico refunds part of what a TV or film production spends in the state?

Critics repeatedly used the word “subsidy” to describe the program, similar to the phrase Gov. Susana Martinez has employed since announcing her desire to lower from 25 percent to 15 percent the refundable tax credit the state gives to production companies that meet certain requirements.

Supporters of the program, meanwhile, returned again and again to the phrase tax credit or discount, and avoided “subsidy” like the plague.

The simple choice of words has proven effective, as even many of the amateur videos produced to promote the NM film incentive showed even NM filmmakers think the incentive is merely a reduction in taxes owed, rather than the actual cash payout it is.  Sadly, even some New Mexico lawmakers are confused about how the program works:

Rep. Dennis Kintigh’s choice of words caught the attention of Rep. Sheryl Williams Stapleton, D-Albuquerque, who asked Kintigh what he thought of the tax credits, exemptions and deductions New Mexico gives to other industries…

“This is fundamentally different,” Kintigh said to Stapleton. “Show me the checks. I can show you … of checks written from the public treasury to the film companies,” Kintigh said.

Kintigh held up a state memorandum listing more than $180 million in payments to more than 110 TV and film productions over the past three years, including the $65.9 million from last year.

“There are no corresponding checks” to the other industries, he told Stapleton.

Stapleton shot back that the effect was still the same. Whether the state cut checks or decided not to tax an industry through tax credits, exemptions or deductions, the “state is getting less money,” she said.

Rep. Stapleton is totally incorrect.  The effect of a normal tax credit and a refundable film credit is NOT “still the same”.  With a normal tax break for, let’s say, an oil company, the state is collecting less in taxes…but it’s still collecting taxes from that company overall.  With a film credit, not only is the state not collecting taxes from the production company, they are writing them a check.  Rather than collecting less, NM is paying out more.

And before the New Mexico film backers dispute the assertion their program is not a “subsidy”, allow me to point out the New Mexico Film Office itself calls the film credits “cash” and boasts the state “literally sends you a check”:

Is it a rebate or a credit?  Technically, New Mexico has a “refundable tax credit.” In other words, cash for the full amount – with no brokering required. TRD literally sends you a check or deposits the amount into your bank account.

Is the credit on the full amount or just the tax portion?  The full amount. Example: you spend $95.00 and $5.00 on tax for a total of $100.00. You get $25.00 back.

There you have it.  Stop calling it a credit and a subsidy, because the film office calls it what it actually is: CASH from public coffers.  Even more upsetting than this frank admission of what the incentive actually is (a cash handout), was a tidbit from the film office about where much of the cash paid as wages to “performing artists” went in 2010:

LFC estimates, based on discussions with the film division, that payments to performing artists in FY10 were on the order of $22 million and virtually 100% of that amount would have qualified for the credit. Of the $22 million in performing artist payments, approximately 80% is paid to non-residents.

According to data from the New Mexico Film Office and the tax & revenue department (TRD), the state has paid out a staggering $270 million in cash for refunded film credits since since just 2008:

In Saskatchewan, Canada, the same silly debate on what the film credit should be called has been playing out for the last several weeks.  Since 98% of all credits issued in the province were refunded as direct cash payments to production companies, Saskatchewan Premier Brad Wall and others have begun calling the program out for what it actually is: a grant.  Film backers hit the roof when they heard this.

Just like New Mexico, Saskatchewan film backers are either totally ignorant of how the credit actually works or, worse, they are knowingly fighting the truth in a deliberate effort to cloud the debate and confuse the public.  Let’s see how this plays out…

In a comment exchange on metronews.ca, I debated a Saskatchewan film backer after he/she wrote the following:

The SFETC was not a grant, of course.  It was a tax credit no matter how Premier Wall continues to characterize it.  The money used to pay for it would not have been in the Sask coffers to begin with if the productions had not taken place.  If anything, it was a rebate on amounts paid.  The producer spends $10 and gets part of it back from the taxes on the goods and services from the $10 itself.  A child running a lemonade stand can comprehend that – the real question is why does the current government continue to dismiss the facts without even trying to address them directly.

I replied:

When 98% of the tax credits are refunded as CASH directly to a producer who paid ZERO in taxes, it is absolutely, by definition, a GRANT.  People who dispute this need to open a dictionary.  It’s a grant.  Period.

Film backer rebuttal:

Love the dramatic conclusion to your post, but it doesn’t make it any more true.  My guess is that you’ve never financed a film, television or interactive production with a tax credit in Canada before and had to take out a bank loan and attendant risk to finance it while you awaited the refund.  If you had, you likely wouldn’t call it a grant; and even it you did, you’d still be wrong.  Your argument follows the same pattern as others that suggest the program was a grant – it completely ignores the revenue side of the equation.

For the record, no one was ignoring the “revenue side of the equation”.  Fact is, the evidence showedthe revenue from production spending was, sadly, still short of the cost of the cash payouts.  In any event, I responded with the following:

So, you take out a loan (money that is not yours), often in the amount of the expected credit rebate (also money that is not yours) and repay it with the cash refund from those credits.  Using money that does not belong to you to pay for a large portion of the budget.  If that doesn’t sound like a grant to you, here is the dictionary definition:

“To bestow; confer: grantaid; To transfer; A giving of funds for a specific purpose.”

Break out that last one: A giving of funds (film credits refunded for cash) for a specific purpose (to film your project, specifically).

If you are still going to insist it is not a grant, you are at war with reality.

The film backer, sadly, did continue to insist it was not a grant, proving they are at war with reality….maybe it’s why they are good at storytelling.

There are many benefits from production spending.  It does create jobs. It can advance culture. It can support growth in the arts. It does impact many indirectly.  It has intangible qualities like boosting morale.  These are facts.

Also a fact?  Film incentives cost the public coffers more money than they return.  Film backers can, and should, argue based on the facts.  Instead, they insist on telling lies.  Madness.

If you have never read it, please DO NOT miss the Film Incentives 101 post.  Educate yourself.  I dare you.

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