Mass. Film Tax Credits: Blessing Or Boondoggle?

Ben Affleck films a scene from "The Company Men" in downtown Boston in 2009. (akrk5785/Flickr)

Ben Affleck films a scene from "The Company Men" in downtown Boston in 2009. (akrk5785/Flickr)

BOSTON — Two of the movies up for Best Picture at this weekend’s Academy Awards were made here in Massachusetts: “The Fighter,” starring Boston native Mark Wahlberg, and “The Social Network,” the story of how Mark Zuckerberg created Facebook when he was a student at Harvard.

In all, films shot in Massachusetts have 16 Oscar nominations this year. But that number might not be so high if it weren’t for state taxpayers. That’s because in 2009 — the year most of those movies were produced — Massachusetts gave out more than $80 million in tax credits to encourage filming here.

But the wisdom of those tax credits is in dispute. So WBUR’s All Things Considered host Sacha Pfeiffer spoke with two people on separate sides of the debate: Peter Enrich, a law professor at Northeastern University who opposes the state’s film tax credit program, and supporter Vinca Jarrett, founder of the Boston firm FilmPro Finance, which helps movie-makers get financial backing.

SACHA PFEIFFER: Vinca, do you have specific examples of how cities or towns have benefited because of a movie that was made in Massachusetts?

VINCA JARRETT: Absolutely. There is a movie called “The Invention of Lying” that was filmed here last year with Ricky Gervais and that put an actual $2 million into the city of Lowell’s income. Essex got $150,000 from the movie “Grown Ups.”

PFEIFFER: Peter, you don’t quite buy that the benefit is that beneficial?

PETER ENRICH: No, and we have to understand a couple things. First, the state is presently spending about $100 million a year on these programs. What are we getting? The Department of Revenue tracks every dollar that is eligible for the tax credit and they just issued a big report, and in the big report they said, ‘Let’s add up all of the jobs that are produced in Massachusetts by the spending that is eligible for the tax credit.’ And of the jobs that are of Massachusetts employees, it was less to 500 jobs. The cost works out to about $170,000 for each of those jobs. The typical job pays about $50,000.

PFEIFFER: Vinca, as you certainly know, the state is facing a serious budget problem: a budget gap of up to $1.5 billion. Do you think that, given the state’s current economic condition, when it’s having to look at cutting local aid and public higher education and mental health hospital beds, it can afford tax credits to the film industry?

JARRETT: I think they can’t afford not to do it. I think if they don’t do it, we will lose an entire industry that’s been creating and building.

PFEIFFER: Do tax credits for the film industry really spur long-term economic development? Because many of these films are only on location for a few months, maybe only a few weeks. So how much of a lasting impact do the credits ultimately have?

JARRETT: An individual film may come in for anywhere from a month to six months, but a production company lasts forever. And what we’ve seen repeatedly in the strong tax credit area is the same production companies keep coming back and making films again and again and again. Disney keeps coming back and bringing us more movies. Local home-grown producers like Dorothy Aufiero, who did “The Fighter” this year, is looking to bring not one, but several more projects here. She’s made many projects here, she lives here, she’s well-connected, and she’s bringing more and more movies.

ENRICH: The problem is that film production is a very mobile business. It takes a few months to make a film. The next film is going to be located where it makes sense to locate that next film. The few early states to adopt the tax credits — Louisiana and New Mexico were the first — they each built infrastructure, sound stages and things like that, thinking that they were going to secure an industry. Those sound stages are now in bankruptcy because other states came in and offered similar credits and the business moved elsewhere. This is not like investing in a biotech facility that, once it’s there, it’s going to be there for 20 years. This is: we’re going to have to continue paying $100 million every year for the indefinite future. And we have to weigh the costs against the benefits.

PFEIFFER: Vinca, the Department of Revenue in the state found that only about a third of new spending fueled by these tax credits went to Massachusetts residents or businesses, and that a lot of the money went to fund the salaries of movies stars who make a million dollars or more. If only a third is staying in the state, is that worth the expense of the program?

JARRETT: Talent, producers, writers, directors — this is what brings the film in in the first place. And to be competitive, we must offer this to them.

PFEIFFER: Peter, as Vinca points out, almost every state in the country now has film tax credits. Does that give Massachusetts no choice but to offer them as well for competitive reasons?

ENRICH: No. I think probably those states that are smart enough — and a couple have suspended their programs — to spend the money on other things and seek out other niches where they can be more productive, are going to end up with stronger economies as a result. We would not have as robust a film industry, but we could spend that $100 million and do a lot of other things that would be much better for our future.

JARRETT: I think there would be states that would definitely debate that. New York has increased its tax credit. On March 2 Puerto Rico will be increasing its tax credit. Louisiana has maintained one of the strongest film tax credit programs. And in spite of the fact that too many studios went in too quickly, there are several studios that are still thriving and have regular production coming through there.

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  • MA filmworker

    Mr Enrich neglected to share some important facts about the MA Film Tax Credit (FTC). Most importantly. He mentions that on average the state has “paid out” almost 100 million dollars annually. What is not mentioned is that this is that producers get this money AFTER they have invested their money in the state. And then must apply for a tax credit. Additionally, the annual outlay reflects over 300 million dollar investment over the same term in the state of MA
    He also doesn’t mention that this money would not be in the state’s economy if the FTC did not exist.
    This cannot be stated more clearly. This money is not taking away from any state programs.

    The assertion that he does not create jobs or economic activty is another falsehood.
    During 2009. Over 9 films wore produced and shot in MA. The Town alone employed over 300 locals on its’ crew. The DOR must be using the “new math”
    Anyone who doubts the economic activity benefits should take a look at the UMASS/Boston report that was published last year.

    • Zacklazar

      Another fact that is glossed over is that the DOR has STILL not written the code that allows the state to collect millions in state payroll and residuals taxes on highly compensated actors. That in and of itself deprives the state of even more revenue generated by film production and in my eyes is a dereliction of duty on the part of the Department of Revenue.

    • Vinca Jarrett, Esq.

      Very good point, “MA Filmmaker”. A correction and another point. If $100 million/year is issued, then AT LEAST $400 million is invested in the state in film production. Not all “spend” on production is covered by the tax credit under the law, and initial development (scouting and the like), as well as countless line items the DOR has said doesn’t qualify (such as the cost of bonding a film, as well as the audit prepared required in order to file for the tax credit), is SPENT in MA on the film. Thus, it is more than $400 million spent in MA in order for $100 million to be issued.

  • BRotundo

    The tax credits are simply giving back a bit of money that the state wouldn’t have in the first place if the movies didn’t shoot in MA. The film industry has billions of dollars to throw around and anything we can do to encourage them to spend some of that employing MA residents and supporting local businesses is going to help the local economy. If a movie considers shooting in Boston but decides to go to Louisiana instead because they have a better film tax incentive program, we lose jobs and millions of dollars that could have been spent in Massachusetts. If the state gave out more than $80 million in tax credits, that’s because films shooting in the state spent FAR more than $80 million…

  • Zacklazar

    As I said in my reply to MAfilmworker below:
    The Dept of Revenue has a lot of nerve since they seem reluctant to write Residuals, Royalties, and payroll taxes from highly compensated employees into the existing tax code. Therefore the state will be losing out on faxes that would have been paid on residuals from dvd, cable and digital sales from the Oscar nominated movies of last season. That’s a lot of money.

  • Karen Stark

    The FTC definitely helped me. I worked more in 2007 – 2009 than I ever have in MA. Prior to that & in 2010
    when the Governor announced he was “thinking about capping the tax credit” I had to leave the state to
    earn enough to support myself and my son. I considered moving last year because it was so slow in MA. If the tax credit is repealed, I will definitely have to move to continue my craft.

    I am a location manager and scout & have been in the business for over 30 years. I have worked on many features, television series, pilots and commercials. In the years 2007 – 2009, I gave many donations to local schools, churches, and funds for organizations in cities & towns. These donations were not necessarily for a locations we needed, but to make the town/neighborhood feel better about the intrusion into their lives. I think this is something that has not been taken into consideration by the opponents of the tax credit.

    Many people like to look at the film business as “temporary”. My argument is to compare us to construction workers. We work as independent contractors just like those who build houses and buildings. We move from job to job just as they do. If those who oppose the tax credit can justify giving the real estate developers concessions & tax breaks, then they should recognize our craft as well.

    Other states have realized that the revenue generated by bringing in features is beneficial. Studios will bring in out of state crew (as well as hiring locals). All of those crew members brought in will spend money on restaurants, clothing, entertainment, incidentals, etc. – all of which the tax credit does NOT apply. They also bring their families here & rent vacation homes and tell their friends what a great place MA is to visit.

    In summary, I think it is a HUGE mistake to repeal the tax credit in this state. Massachusetts has so much to offer, and if the studios can substantiate it financially, features will continue to be filmed here & the state will see positive results.

    Karen Stark
    Location Manager
    Right Coast Locations
    Hudson, MA

  • Mr City

    Tax credits are a complex subject. Its much like the car industry that barks on about how many miles per gallon their cars give and how “green” their hybrid cars are. What everyone needs to understand is what some in the car business calls “well to wheels”. What that means is what is this real cost from start to finish. That is not an easy calculation to make.

    For example jobs. Well first there are the jobs of the folk in Government departments that actually give out the tax credits. That is folk employed and taxes paid into the system. Then there are all the lawyers and accountants, financiers etc etc all the way down to the folk making the film. You also need to add in the “feel good factor” that we all get from seeing our home town on film.

    However, the real issue here is that tax credits don’t make for a long term sustainable business. All business have to be able stand up on their own merits and make profits. Film is not a critical business to life so if film makers can’t survive and make profits then the net net bottom line is that they should cease to trade.

    I am based in London. Here in the UK the Exchequer (both main parties!) have made a savage and embarrassing mess of tax credits and the tax system. The tax system has been hijacked by the tax avoidance and finance industries and as a result dreadful films have been made. Incompetent producers have traded (and still continue to trade) that produce films with not the remotest possibility of being profitable.

    So finally what about tax credits. I say if you want a profitable healthy long term film industry then get rid of tax credits and let the business stand on its own feet. Instead give film production companies lower rates of corporation tax on the profits from films. Film is not crucial to life but a cracking film makes us all feel great.

    Let the debate continue!

    • Vinca Jarrett, Esq.

      To the silly British man that I know: Yes, the Brits made an abusive mess of their tax credit system. That said, giving corporate breaks on profits only puts money into the wealthy’s pocket (and they’ve got enough). Tax credits, the way they are issued in the U.S., builds jobs and industry of the common man. Saying film is not a long term sustainable business is misguided. The entertainment industry is the largest growing profit center in the world. the film industry and entertainment generally continues to rise even as other industries such as bio tech and solar are failing (even with those big corporate tax breaks you speak of). A tax credit creates far more jobs than just gov’t and finance. It creates jobs at all levels of production. In MA, we were a mere 2 crews deep in 2007. Now IATSE supports 6-8 crews regularly just 3 years later. Many of these people were unemployed due to other failing industries. Now thousands are employed. With regular films, television and commercials, crew will continue to work. Tourism is built by film tax credits as well. More people have our state on their mind when they see films made here (high profile films that get nominated doesn’t hurt either). Movies are not just an “extra” in our society. They are in part impacting society at every level. And Massachusetts is one of the best, most professional and thriving states to come to do that.

    • MA filmworker

      To our friend from across the pond: You raise an interesting point. However, it appears to me that you are not quite familiar with the structure of the MA FTC. As a lifelong taxpayer in MA, I have taken a great interest in how tax credits-film and otherwise0- are structured.
      There are more than enough examples of government providing tax credits/incentives to business to locate or re-locate within their governmental jurisdiction.
      Indeed. Just recently, Evergreen Solar, announced that it was leaving the state (for China) taking with it 800 jobs. This after receiving over 50 million dollars from the commonwealth of MA.
      As a taxpayer, this bothers me greatly.

      The salient point about the MA FTC is that the way it is structured does not allow for this type of “exodus” to occur. As I pointed out in my original post. The tax credit is only applicable AFTER the initial investment of private industry. And as another poster noted. And then it must be applied for and not all expenses are applicable to the credit.

      What is impressive about the MA FTC is that makes sense on so many different levels. Creates well paying jobs, many that include health insurance and retirement benefits. Protects the taxpayer.
      And promotes the building of the infrastructure (both personel and brick and mortar) for a ongoing sustainable industry.
      But, state government needs to provide a consistant and stable enviroment for that industry to grow.

  • bobvid

    I’d like to see the basic numbers of where the $100M is coming from – where would we be without the film production’s contributions in the Commonwealth? I understand without the production, there wouldn’t be that money to ‘give’ — AND …. There is a lot more origination here than just the movies, and development incentive is what turns small businesses into large – with the changing mode of entertainment and education – all original media creation should be promoted with incentives.

  • Lewis Pedi

    Lewis Pedi As long as they bring money into Massachusetts, I hope they keep filming here.

  • Ren Knopf

    Please revisit this topic.

    Peter Enrich choose, much as did now ex-Representative D’Amico, to ignore the limitations of the DOR report he was quoting, a report that was limited by Beacon Hill in its’ coverage. Vinca Jarrett, while pro-film, was weak in her defense and her numbers. The numbers are there (listed below are links to two reports which give a good cross-section to what the film industry brings to the Commonwealth). The million dollar salary is a red herring that raises hackles and ignores the taxed paid to the state on that million bucks. Also ignored are A) the taxes paid to the state from hotels, fuels, etc; B) the income to we actors, crews, et al who spend in MA and pay taxes in MA and C) the infrastucture that is being built to support this industry – read: jobs, taxes, in-state spending.
    as reported by the Mass. Department of Revenue—the film credit brought over $1 billion in new business to the Massachusetts economy, an average of approximately $270 million a year.

    If Enrich is going to do a cost/benefit analysis, he needs to do better. From 2006 to 2009, by their own numbers, the DOR has the state paying out approximately $150 million in film tax credits while collecting back nearly $42 million in new taxes. That makes the actual net cost to taxpayers over the first four years of the program approximately $108 million— roughly $27 million per year.

    The benefit to our state’s economy over that same time was 10 times greater than the public cost of the program. Thus taxpayers paid a dime for every dollar of new business that the credit generated for Massachusetts.

    D’Amico, prior to actors in Massachusetts working to un-elect him, pulled up his own numbers (numbers can be very sketchy and must be read carefully and without agenda) To wit: he claimed that every new film-related job cost taxpayers $89,755, but on average paid “only” $67,775 ( better than Enrich’s $50k. That average isn’t chopped liver and if a careful examination of DOR’s four-year totals is made, the average cost per job at closer to $15,000— not $170k. Working thru these reports and their findings is a pain, to be sure. And no, not everyone is going to do, not when they want their info in a sound bite.

    We actors took our numbers to the RI Finance Committee and we took them to the MA finance Committee. The unanimous vote of the MA Legislature’s Joint Committee on Revenue, said “YES” to keeping the Film Tax Credit program in place and “working for Massachusetts.” The picture of films coming into MA, taking our money and leaving in the night with no benefit to us is bogus. This bad penny just won’t go away and is seemingly impervious to facts – much like our politics today (and make no mistake, politics are part of this; politicking killed the biz in 2010, a no-brainer result when people scare the money).

    Please revisit this. The links mentioned earlier are below.

    Thank you,
    Ren Knopf, SAG/AFTRA
    Framingham, MA


    • Anonymous

      Wow. You have no idea how incorrect you are, do you? The bogus argument is that film incentives are good investments. You’re not an economist, you are an actor. If you speak lies as well as you write them, you must be very good. That, or you really think you are right. If so, please utilize Massahcusetts’ mental health services before they are cut to subsidize a quarter of Adam Sandlers next movie.

  • Amused

    What I find amusing is: Enrich’s report has been making the rounds around local media. Herald, Globe, NPR, etc. Each time this story gets regurgitated somewhere, Northeastern Law School proudly posts it on their website, probably to distract prospective students from the reality that none of their graduates can find work and are $200,000 in the hole. Anyways, each time Enrich’s study is discussed in one of these articles, 9out of 10 comments eviscerates Enrich and his deeply flawed work and yet, the law school keeps proudly showing the articles on their website. It’s just poor marketing, really.

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