Matt Mitchell from the Mercatus Center has a blog post on loopholes and the relationship between loopholes and cronyism. He particularly focuses on accelerated depreciation. Is accelerated depreciation a loophole?
The idea that “accelerated” depreciation is a loophole can be traced back to Stanley Surrey, the Harvard law professor whose work in the 1950s, 60s, and 70s influenced many tax reformers, including Senator Bill Bradley and officials in the Reagan Treasury Department. When the Congressional Joint Committee on Taxation began cataloguing loopholes in their annual “tax expenditure” list in 1972, they too called accelerated depreciation a loophole.
This thinking persuaded me to list accelerated depreciation alongside other tax loopholes as a privilege. In conversations with friends and colleagues over the last few weeks, however, I’ve come to change my mind on this one.
Glenn Harlan Reynolds from The Wall Street Journal has written the following column, stressing how at the Academy Awards Ceremony the only story that didn’t get a nomination was Hollywood and Corporate Welfare. The movie industry supports on the surface higher taxes on the rich, but on the side gets more than $1.5 billion in government handouts.
With campaign season over, you’re not likely to hear stars bringing up taxes at this weekend’s Academy Awards show. But the tax man ought to come out and take a bow anyway. Of the nine “Best Picture” nominees in 2012, for example, five were filmed on location in states where the production company received financial incentives, including “The Help” (in Mississippi) and “Moneyball” (in California). Virginia gave $3.5 million to this year’s Oscar-nominated “Lincoln.”
Show-Me Daily’s Michael Rathbone points out that Missouri’s wine industry tax credits aren’t necessary; the industry existed and thrived long before the state’s tax credits showed up.
These wineries managed to stay in business for decades without the assistance of this tax credit. Going even further back, Missouri had the second-largest wine industry in the country before Prohibition.
Read the whole post here.
The Commonwealth Foundation points out that one of the main arguments for film tax credits, that the tax credit is necessary to bring film production to the state, doesn’t play out.
In fact, most movies and other productions filmed in Pennsylvania don’t receive the film tax credit. This fact undermines the argument we need a bigger tax credit (or one at all) to attract films.
Read the rest here.
Carten Cordell and Kathryn Watson note that state tax incentives for film production amount to little more than preferential treatment of the film industry.
Behind the scenes, policy analysts and lawmakers say Lincoln, which received roughly $3.5 million in tax incentives ultimately from taxpayer pockets, offers a glimpse into Virginia’s runaway tax preferential treatment to subjectively selected industries. It’s a practice they say skews the level economic playing field and eats up tax revenue needed elsewhere.
Beltway Confidential remarks on a new report that Michael Moore obtained hundreds of thousands of dollars in film tax credits when he filmed “Capitalism: A Love Story.”
According to the report, liberal Michael Moore received $841,145 in incentives to film his documentary “Capitalism: A Love Story” in Michigan.
Dennis Owens of ABC27, a local station in Pennsylvania, writes about something we don’t hear enough about. A company originally applied for special tax preferences from a local government agency, but eventually withdrew them:
But not good, according to critics, was Ahold USA’s request for local tax breaks. Pawelski said the company notified Cumberland County, Lower Allen Township and the West Shore School District Thursday morning that it was withdrawing its Local Economic Revitalization Tax Assistance application. But it will move forward with the project.
“They shouldn’t be in the business to get tax subsidies from the government,” said Mike Wood of the liberal Pennsylvania Budget and Policy Center. “When we have critical services like fire protection and police on the street and teachers in our schools, we shouldn’t be giving that tax money up to help profitable businesses be even more profitable.”
The Tax Foundation posted a review of a study released by Clevland State University which shows that Ohio film tax credits have cost the state about $22.4 million.
All told, the report estimates that Ohio film projects have received $28.3 million in tax credits (p. 9). The study’s authors estimate (through an economic planning model) that the subsidized projects generated $35 million in income and $113 million in output (p. 24), which in turn generated $5.9 million in state tax revenue (p. 25). Generously assuming that the tax credit induced all of this activity, the credit was therefore a net loss to taxpayers of $22.4 million ($28.3 million minus $5.9 million).
Jonathan Humma, a writer for Keystone Liberty, details the tax breaks for Big Oil in the Pennsylvania state budget:
As a part of a budget deal, some Democratic and Republican policymakers are advocating for a plan set to award Shell Oil a prolonged tax credit in exchange for the construction of a natural gas cracker plant in Western Pennsylvania. Proponents argue that the Shell Plant will bolster the state economy by creating thousands of jobs. However, in reality, Pennsylvania has a long history with targeted tax credits and little to show for it.
New York is favoring the film production industry by expanding its tax credit program for post-producton work. From the International Business Times:
On Tuesday, Gov. Andrew Cuomo approved yet another expansion to the state’s already robust incentive program for film and television production, signing legislation that sweetens the deal for filmmakers who do post-production work in the Empire State.
The law, which takes effect immediately, increases tax credits from 10 to 30 percent for qualifying productions that do post production — which includes editing, visual effects, color correction and sound mixing — in New York City and its surrounding counties.