Mention Hollywood and politics in the same sentence, and most people envision liberal screen stars lining up on Rodeo Drive to save a whale, rescue a polar bear or hug a Democrat.
That stereotype is flipped in Wisconsin these days, where a conservative Republican state senator has emerged as a leading defender of current state tax incentives for the film-making industry and the Democratic
governor has cast himself as a major skeptic of doing business with Tinseltown.
Sen. Ted Kanavas (R-Brookfield) believes the film tax credits he championed in 2006 are creating jobs and bringing dollars to Wisconsin, while Gov. Jim Doyle thinks the program he signed into law that year has failed to live up to its hype and should be left on the cutting room floor. It may not be the biggest issue in the state budget bill – but it illustrates the difficulty of targeting state economic development dollars, even when intentions are good.
The state Department of Commerce issued a report last month on the film tax credits and the conclusion was harsher than reviews of "Meet the Spartans." Simply put, Commerce believes the tax credits cost more than they’re worth in economic benefits.
The report called the program "really expensive" because it’s not a typical tax credit program, which is capped at a percentage of taxes paid, but a refundable tax credit program that can act almost like a
blank check. If the refundable tax credit exceeds the recipient’s actual tax bill, the state writes a check for the difference. In Louisiana, that very scenario may cost that state’s taxpayers more than $20 million.
"The program’s cost-benefit analysis compares poorly to other programs aimed at manufacturing, technology, and agriculture," the report concluded. "In fact, Commerce can offer much more assistance to a film or video game than a manufacturer, a biotech start-up, or a cheese plant."
Commerce Deputy Secretary Aaron Olver called the film tax credit "the least effective weapon" in the agency’s arsenal for economic development. He said a tax credit for manufacturers costs the state a
little more than $3 for every hour of labor it creates, while the film tax credits cost 20 times as much for the same hour of labor.
"In other words, if we had to choose, we can get one full-time job on a film for one year or we can get 20 factory jobs that might last for 20 years," Olver said.
The report cited the upcoming Johnny Depp film, "Public Enemies," which was shot in Wisconsin. The film generated spending of $18.5 million but all but $5 million of that took place outside the state. "Even making favorable assumptions about indirect economic impact, ‘Public Enemies’ only returned $1.70 for every $1 invested," the Commerce report concluded.
Kanavas believes Doyle and the Commerce Department are sitting in the wrong theater. He argues the tax credit created 759 jobs in 14 different communities in 2008 alone, and not just temporary jobs that fade away when film crews pack up for the return trip to California.
RDI Stages in Milwaukee, Pulse Studios in Green Bay and Tanner Monagle sound and video studio in Milwaukee are products of Wisconsin’s film tax credits, Kanavas said. Those facilities as well as Wisconsin’s growing video game industry are examples of permanent, high-wage jobs accelerated by the credits, he said.
"Instead of killing a growth industry in Wisconsin, let’s fix the law," said Kanavas, a former software company owner. Kanavas described software as a "project-based industry" that is constantly remaking itself. In fact, he noted, film and gaming technologies are spawning other "predictive technologies" that can be applied in sectors ranging from economics to defense.
Doyle is right not to be "star-struck" at taxpayer expense but Kanavas has a point about long-term software and gaming jobs. Perhaps this script can be rewritten so there’s a happy ending for everyone: Cap the tax credits so the taxpayers aren’t paying Johnny Depp’s signing bonus,
and treat film and gaming projects like other knowledge-based industries.
Tom Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.