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Tax Incentives or Tax Scams?

The TV and movie industries have, for the most part, been a good source of income here in Hawai'i. Not only are they mostly environmentally friendly, but in addition to the well paid union jobs they create, you get free advertising probably worth millions.

From Hawaii Five-O, Magnum PI, Lost, to various TV shows, movies (e.g., Jurassic Park and Raiders of the Lost Ark) and commercials, Hollywood has been, on balance, mostly good for Hawai'i.

But in some cases, and not necessarily the ones listed above, there are behind the scenes efforts to get "special consideration" or incentives from government and businesses. By that I mean tax credits, free/reduced sound stage rents, free/reduced housing, free/reduced air fare, etc. The unstated threat is that if you don't give the producers such consideration, they will either leave and go somewhere else where someone will accommodate their demands, or not come in the first place.

Unfortunately, sometimes it works. Places like Canada and Australia provide huge tax credits, worth millions of dollars, to come and film in their locations. Hollywood has responded by filming in these countries specifically because of these inducements.

But the question is always, do you get more benefits from these films than the cost of these considerations? Oftentimes, this is a difficult question to answer because of the problem of measuring the benefits. Figuring out how much direct taxes are paid by the companies is usually doable. The problem is in figuring out how much taxes are generated by people viewing the movies/TV series and deciding, on that alone, to come to Hawaii and spend some money.

That question aside, local and state governments, all over the country, have joined the tax giveaway sweepstakes. This is not only for movies. I'm talking about tax adjustments/credits for just about every business there is.

But this article says many, if not most of these efforts end up being huge scams where taxpayers end up holding an empty bag.

Although I'm not saying there shouldn't be incentives for business, I am saying you to have to carefully consider the costs versus the benefits by following up and evaluating the programs. Otherwise, all you are doing is stealing from the poor and giving to the rich.

Have a Great Weekend, Everyone - Aloha!

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This page contains a single entry from the blog posted on August 12, 2005 9:15 AM.

The previous post in this blog was SuSEing it Out.

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