Tuesday, February 24, 2015

Tuesday, February 24, 2015

Film industry study undermined by its own figures; Tax credits for working families off the chopping block; and There’s a hole in the bucket

 

Film industry study undermined by its own figures
In his latest attempt to convince the public that Louisiana’s film subsidy program somehow pays for itself, the president of the Louisiana Film Entertainment Association rolled out an industry-funded survey Monday which claims that nearly 15 percent of state tourism activity comes courtesy of the movie industry. Will French, who is also a tax broker who benefits from trading film credits, told the Baton Rouge Press Club that when tourism benefits are taken into account, film subsidies practically pay for themselves.

 

But French’s claims are undermined by actual facts – including a graph from his own presentation that shows Louisiana hosted about the same number of visitors in 2003 as in 2013. This fact was fortunately not lost on Will Sentell of The Advocate:

 

The number of tourists who visited the state in 2013, the most recent year for which numbers were available, was about the same as it was when the film program was in its infancy a dozen years ago.

 

There is also the pesky fact that every single independent study of the film program – most of them done at the behest of the state Department of Economic Development – has found that film credits return anywhere from 15 to 23 cents on the dollar.

 

Meanwhile, The Advocate’s Stephanie Grace notes that film credits are a magnet for scam artists, citing the fact that convicted felon Malcolm Petal was recently certified for $6.5 million in state lucre while another company received nearly $1 million in state support for a project about the “Saintsations” in which costs were wildly inflated.

 

Their crime would not have been possible if the program didn’t provide tax credits to moguls who don’t even accrue tax liability in the state, a situation that creates a separate marketplace to buy those credits and sell them to locals who do owe taxes; that’s what Petal’s company, LIFT Productions, was set up to do. In fact, it’s distorting to refer to the payouts as tax credits at all because the state often just cuts checks to players that exceed their tax bills. Subsidies is more like it, and generous ones at that.

 

Tax credits for working families off the chopping block

Some good news on the gloomy budget front: A pair of tax credits that benefit the working poor will apparently not be on the chopping block when Gov. Bobby Jindal unveils his budget recommendations later this week. This despite the fact that the governor has said “refundable” tax credits that return money to taxpayers above their state tax liability are ripe for reduction. As Nola.com’s Julie O’Donoghue reports:

 

The governor is not targeting the Earned Income Tax Credit or the School Readiness Tax Credits, which are aimed at helping low-to-moderate-income families and children…Initial estimates show Louisiana is spending about $777 million annually on 28 refundable tax credit programs, but only $187 million of that expense is tied to an actual tax liability. The vast majority of the money spent, $590 million, is given out not as a credit necessarily, but as a payment of sorts.  

 

Neither the Earned Income Tax Credit nor the School Readiness Tax Credits are a particularly big chunk of the $590 million in refundable tax credit expenses the Jindal administration has said it is targeting. The Earned Income Tax Credit accounts for about $21 million of the “above tax liability” expense, according to the Department of Revenue. The School Readiness credits account for a little less than $3 million of that $590 million figure.

 

There’s a hole in the bucket

The Jindal administration’s plan to close the second mid-year deficit of the 2015 cycle ironically just made balancing the 2016 budget that much harder, according to the Advocate’s editorial board.

 

Because the Jindal administration’s midyear cuts involve more shifting around of cash in various state accounts, the Legislature faces an even bigger challenge later. In the words of the Legislative Fiscal Office: “Approximately 80 percent of the solution involves MOF swaps replacing SGF that use one-time resources that will likely require another revenue source in FY 16.” Loosely translated, this means that the governor is once again patching one-time money (Means of Financing) into accounts that pay for recurring expenses. Because he’s taking whatever limited revenue increases have occurred to patch the current year budget hole, the budget hole for Fiscal Year 2016 becomes worse.

 

Number of the Day

 

$590 million – The amount of refundable tax credits above taxpayers’ liability that is on the table for reductions during the legislative session to help balance the budget (Source: Nola.com)