Two thumbs down for movie production tax break
Posted May 31, 2019 in Press Releases
Policy Matters says break isn’t worth the cost
In a “Budget Bite” released today, Policy Matters Ohio panned the performance of Ohio’s motion picture tax credit and urged the Ohio Senate to take direction from the House, and cut the tax break in its 2020-2021 budget proposal.
Tax breaks drain state resources needed for schools, safe streets, clean water and other basic public services. Ohio sets aside $40 million a year for a tax break that funds up to 30% of eligible film production activities. Studies show the break is a money loser for the state. Between 2011 and 2015, Ohio spent $32 million on the credit, but it only generated about $22 million in tax revenue. Of that, only $6.7 million came back to Ohio in state and local taxes, according to Cleveland State University.
“Motion picture production is not a public service,” said Policy Matters Senior Project Director Wendy Patton, “but Ohio sets aside $40 million to help movie producers while a lack of funds leaves the drug epidemic ravaging communities, lead poisoning of children rampant in urban and rural neighborhoods, K-12 school funding unconstitutional and the infant mortality rate among highest in the nation. We should be asking: Why are lawmakers throwing millions at footloose, out-of-state corporations when there’s such need to take care of Ohio and Ohioans?”
Thirty-three states including the District of Columbia use tax credits to compete against each other in the race to land the next big blockbuster. States are increasingly recognizing the futility of participating in this race to the bottom, and 14, including Ohio’s neighbors Michigan, Indiana and West Virginia, have ended their credits.
Ohio’s credit is especially costly because it’s refundable, so a claimant could still receive a credit even if it’s more than what they owe in taxes. It’s also transferable, and allows a movie producer to sell the credit to another Ohio taxpayer who wants to reduce their tax liability. Even still, an analysis of state share of motion picture activity conducted by Pennsylvania’s Independent Fiscal Office found California, New York and Georgia had about 75% of the market in 2016 – the same share they had in 2007. Ohio had less than .7% share of the movie production market.
“Each state tax break adds up,” Patton said. “Ohio spends more than $9 billion a year in tax breaks. Some of them make sense, but the break for motion pictures is not one of them.”