Study: Film Tax Breaks Generate Jobs, With Hefty State Cost
BATON ROUGE (AP) — Louisiana's film tax credit program produced hundreds of millions in household earnings and thousands of jobs last year, but at a steep cost to the state treasury, according to a new study of the tax breaks done for the state.
Economist Loren Scott estimated Louisiana paid more than $14,000 per job, spending $222 million on film tax credits in 2014 and getting back only $51 million for the state treasury, a return of about 23 cents on the dollar.
Lawmakers, struggling to balance next year's budget with a $1.6 billion shortfall, are eyeing the program for changes, and the economist's report suggests several ideas to tighten the list of expenses that qualify for the tax credits and to more closely audit the spending.
Scott wrote the tax breaks "clearly have an economic impact to the state of Louisiana in the form of increased business sales and jobs for Louisiana residents," but he added that some expenditures "have minimal direct impact to Louisiana's economy."
The report was done for the Louisiana Department of Economic Development and released this week. It looked at the economic impact of tax credit programs designed to bolster three entertainment industries: movie and TV productions, sound recordings and musical and theatrical productions. The state spent nearly $239 million on tax breaks across the three areas last year — with the lion's share going to the film tax breaks.
The film tax credit program started in 2002. State law currently provides two kinds of tax breaks: an income tax credit for 30 percent of production expenses and an income tax credit for 5 percent of payroll costs related to Louisiana workers employed on the production.
The program has driven the creation of a new industry for Louisiana. But lawmakers are questioning whether the state is shelling out too much money to keep the jobs while they're weighing deep cuts to health care services and higher education next year.
Gov. Bobby Jindal didn't propose adjustments to the film tax breaks in his budget recommendations, but Economic Development Secretary Stephen Moret told lawmakers recently that "it would be constructive to make changes."
Scott estimated the film industry brought in as much as $1 billion in sales and $728 million in household earnings in 2014, supporting as many as 12,100 direct and indirect jobs.
But he added a caveat, saying those estimates were based on "certified Louisiana spending" numbers that include the multimillion-dollar payments made to well-known actors, writers, directors and producers.
"It is a heroic assumption that these monies will actually be spent in Louisiana, since these individuals are typically not Louisiana residents," Scott wrote.
He suggested those high salaries could skew the figures upward by more than 25 percent.
With the taxes received from the industry, Scott's report estimates the film tax credit program's net cost to the Louisiana treasury was more than $171 million in 2014 and nearly $190 million a year earlier.
Using the lower estimates of the industry's impact — assuming that those high-dollar salaries to A-list actors and directors aren't included — Scott said the "hit to the state treasury in 2013 rises to $204.2 million and in 2014 to $184.2 million."
– by AP Reporter Melinda Deslatte