Starstruck State House
With a little Hollywood magic, this bare-knuckles brawl on Beacon Hill would make a heck of a movie - a metaphor, really, for what is happening all over America. Billions are at stake as the rookie governor and the powerful Speaker engage in an old-fashioned, manly showdown for the soul of a state, or at least control of a building. The backroom deals. The oily gambling lobbyists. The powerful union bosses. A cameo by Donald Trump, stood up on the links. The crusading columnist!
It could happen - but would it ever take a load of tax credits. If our dysfunctional state leaders can agree on nothing else, they can agree on the movies. Who doesn't love that Massachusetts has become a movie mecca? True story: The day after I had dinner at Toscano on Charles Street, Cameron Diaz occupied the very same seat for lunch. Imagine that.
The movie business has exploded in Massachusetts. Two words: tax credits. After watching movies about our Boston being filmed in Toronto and New York and anywhere but here, the Commonwealth answered back with tax incentives that are among the most generous in the country. If we pay, they will come. As one director said on Backstage.com: Film executives "would shoot a movie on Mars if they could get a 25 percent tax break."
At a time when we are fighting about closing corporate tax loopholes, Massachusetts has opened up a gusher for the movie industry. It would be worth determining what we are getting for our money before we widen the gusher still further as is about to happen, no questions asked.
The Legislature is considering a bill that would provide a 20 percent tax credit for construction of the kind of film studios now being discussed for Plymouth and Weymouth. That bill would follow legislation that went into effect in 2006 and was expanded last year that provides a 25 percent tax credit on production costs and exempts the industry from the state sales tax.
Movie investors are not stupid: Leave a bucket of money on a street corner and they will come get it. In 2005 a single movie, "The Departed," filmed briefly here; Nick Paleologos, the director of the Massachusetts Film Office, expects as many as a dozen movies to be made here this year, bringing in jobs and investment. But state taxpayers will be getting a bill.
Film tax credits, the Boston Federal Reserve said in a highly skeptical report two years ago, "cost states considerable foregone tax revenue. The film production stimulates little additional economic activity in other industries. Consequently, film tax credits do not 'pay for themselves' by indirectly generating additional corporate income, sales and property tax revenues."
Louisiana, one of many states to get into this game, offers an instructive example. Movie production soared to $355 million in 2004 from $12 million in 2002 after the state expanded the tax credits. A legislative study found the tax credits cost the state about $59 million in revenue in 2004. After applying all the usual multiplier effects, the study found, the state could expect to recoup 16 to 18 cents on every dollar spent. That, it said, was a "generous" estimate.
And what of the cost of Massachusetts "best in class" film tax credits? The Massachusetts Department of Revenue is now examining just that question. The preliminary estimate for 2008 is reported to approach, if not exceed, $100 million. Adding the new tax credit for construction of film studios could add as much as $50 million to that number. That is a lot of dough for one industry, considering the governor's campaign to close a series of corporate loopholes would raise roughly $300 million in all.
Movies are fun, and times are tough. Film tax credits do create jobs - as long as government is willing to rent them with tax credits. Few industries, however, are quicker to pack up and move for a better deal than the entertainment business.
In its report, the Boston Fed summed up its cautious view by citing a quote from director Mel Brooks about one of his own movies: "It will make millions. Unfortunately, it will cost millions."
We need better answers. So far, we haven't even asked the questions.
Steve Bailey is a Globe columnist. He can be reached at bailey@globe.com or at 617-929-2902.
