December 26, 2014

Maryland Legislative Report Ignites Film Tax Credit Debate

A recent Maryland Legislative Services Department report evaluating the economic benefits of the state’s film tax credit ignited a debate about whether the state gets anything in return from credits.  “The economic development activity generated by the film production credit is of short duration,” the report found. “As soon as a film production ends, all positive economic impacts ceased.” Consequently, the report recommends letting the program credit expire on its July 1, 2016 sunset date.

Maryland awarded $62.5 million in credits in FY 12-16, and although they “comprise a small percentage of the total income tax revenue, the number and amount of credits claimed significantly increased over time.”

The report was triggered by a 2012 law requiring the legislature to evaluate certain tax credits. The authors presented their findings to legislators at a December 2 public hearing, during which film industry representatives criticized the report’s conclusions, claiming the legislative analysts “don’t understand how the [film] industry works” and fail to understand “the indirect effect of having a major production in town,” according to a Washington Post article.

Department of Business and Economic Development Assistant Secretary Hannah Byron said the program was modest, focused on tourism, film, and the arts, according to the article. “We’re not looking to be Hollywood of the East. We’re not looking to be California or New York. We’re looking to just keep the infrastructure and keep the jobs and keep what we have.”

The Maryland debate suggests that the tax credit debate is as much about what to expect from economic development programs and when to expect those things as it is about measuring the programs’ results.