Testimony on SB94: Making transferable film tax credit handouts permanent a loser for taxpayers

Victor Joecks

Hello my name is Victor Joecks, and I’m the Executive Vice President of the Nevada Policy Research Institute.

I’m here today to detail some of the negative impacts similar transferable film tax credit programs have had in states around the country.

First, it’s great to hear so many elected officials acknowledge that lower taxes help entrepreneurs create jobs and grow the economy. I hope you acknowledge that reality when considering whether or not to impose the largest tax increase in Nevada history on the rest of Nevada.

There are numerous structural problems with transferable tax credits. Instead of just being a reduction or abatement of taxes paid, these tax credits can exceed the actual amount of taxes paid by film companies. The film companies then sell these credits to other private businesses in Nevada – reducing taxes collected by the state.

In other words, government is picking winners and losers in the economy. The losers are the taxpayers and the vast majority of businesses in the state who have to pay more or receive reduced government services.

In Louisiana, the Legislative Fiscal Office found that transferable tax credits reduced taxes collected by $59 million a year, but only generated $10 million a year in additional state tax dollars. In other words, for every $5 Louisiana spent, they gained back just $1 in new tax money.

In North Carolina, legislative fiscal staff found that film producers claimed $30.3 million in film-tax credits in 2011.

Under the most plausible assumptions the Film Credit likely attracted 55 to 70 new jobs to North Carolina in 2011 … The Film Credit created 290 to 350 fewer jobs than would have been created through an across-the-board tax reduction of the same magnitude.

While film tax credits experienced enormous popularity in the 2000s, many states have trimmed back their film tax credit programs, because of problems detailed above.

Since 2010, eight states, Arizona, Arkansas, Idaho, Iowa, Kansas, Maine, New Jersey and Washington, have ended their film tax subsidy programs. Other states, including Alaska, Connecticut, Georgia, Hawaii, Michigan, Missouri, Rhode Island, Wisconsin and New Mexico. have scaled back their programs or placed limits on their use.