Louisiana’s Film Tax Break Program under Scrutiny
May 21, 2013
After years of fighting attempts to tweak or lessen the generosity of Louisiana’s film tax break program, industry leaders have come to the negotiating table. The state’s continuing budget woes, stretching into a sixth year, have provoked new scrutiny for the billions of dollars in tax breaks Louisiana gives to businesses.
In past years, tax breaks received quick and easy passage, as legislative sponsors described them as critical to one industry or another and talked of the hundreds or thousands of jobs they predicted would follow.
Now, lawmakers – particularly in the House of Representatives – are zeroing in on the price tag and questioning whether Louisiana’s getting enough for what it gives away in tax credits, exemptions, rebates and deductions.
In many instances, opposition to a new or expanded tax break is led by Republicans, who have traditionally sided with business groups to support such programs.
“At what point do we stop giving away our revenues?” said Rep. Jay Morris, R-Monroe, in one House debate over a tax break proposal.
Tax breaks are becoming a new fissure among GOP lawmakers in the Legislature, caused by years of budget shortfalls and a newfound understanding that the state has done little to track or evaluate programs that drain billions from the treasury each year.
Rep. Kevin Pearson, R-Slidell, said he understands tax breaks help create jobs but there was a limit to what the state could afford.
“We really need to go and have a good gut check before we go and say, ‘Here’s another $50 million,’” Pearson said in a recent debate.
The House, where lawmakers regularly shout about gun rights and the need for loosened regulations, even stalled a proposed tax credit for firearm and ammunition manufacturers who move their businesses to Louisiana because of concerns about the cost.
Lawmakers in the chamber also agreed to suspend planned tax rebate programs that haven’t yet started, sending that proposal to the Senate for debate.
In that context, the beneficiaries of one of the state’s more pricey business tax breaks – leaders of the film and TV production industry – recognized they’d better offer suggestions and acknowledge the budgetary concerns of lawmakers.
“We know where we can shave off a little bit here, a little bit there and still remain competitive,” said Will French, president of the Louisiana Film and Entertainment Association.
The association cites a state economic development report that outlines the booming industry in Louisiana and says the state’s tax credit program helped support more than $770 million in household earnings and 15,184 jobs last year.
The report says the industry generated an estimated $54 million for the state treasury.
The flip side is the state shelled out $223 million for film tax breaks last year, according to a legislative audit. And the price tag of the tax break has been growing annually, with the state spending $800 million over five years for the movie and TV industry.
The Department of Economic Development says a recent analysis estimated that every $1 issued in film tax breaks generates $5.71 in economic output. But the state also loses at least 85 cents in tax revenue for every $1 it spends.
French said the industry wouldn’t exist in Louisiana without the tax break program. But he said industry leaders also understand the state’s fiscal climate and could accept some cuts to the tax credits, while making sure to explain the strong economic value of the program.
“It’s a bad fiscal environment. We can’t be taking money out of the other programs if we’re not putting it to good use,” he said.
Lawmakers are still haggling over the changes to the film tax break program. A financial analysis suggests the language developed with the industry won’t shrink the current size of the program, but rather slow its overall growth.
It’s unclear if that will go far enough for lawmakers, who can continue considering tax program rewrites until the legislative session ends on June 6.