AFP-WV Key Vote Alert: Oppose HB 2096 reinstating film tax credits

Feb 16, 2022 by AFP

On behalf of Americans for Prosperity West Virginia and our activists across the state, I urge you to oppose House Bill 2096, which would reinstate the failed film tax credit. We may include these votes in our 2022 legislative scorecard.

Special interest tax carve outs, like the film tax credit, only make it harder for lawmakers to adopt broad-based tax cuts that will put more money back in the pockets of all West Virginians and transform our economy. In particular, film tax credits represent a failed experiment in corporate welfare comprised of government stepping outside its proper role in order to pick economic winners and losers.

There is little credible evidence to suggest that reinstating West Virginia’s film tax credit would result in a significant economic benefit to the state or differ from the utter failure these incentives have had in other states.

Government studies from several states have found that jobs associated with film tax credits were only temporary and that the economic activity created by the incentives are minuscule at best. In the case of a Michigan study, the average job associated with film tax credits was an average of 23 days. A similar study found that, in three different states, nearly 70% of these type of tax incentives went to large companies instead of small businesses.

A study from the Tax Foundation on Alaska’s film tax credit found, “Film tax credits cost states revenue and require either higher taxes or lower government spending elsewhere…At best, film tax incentives largely shift production from one sector to another without producing a net increase in economic activity or employment… the program is unlikely to produce a self-sustaining state film industry.”

Data from study of New York’s film tax credit found that of the $1.2 billion in tax incentives in FY 2017, half of those dollars went to the film industry. Instead of long-term economic development, the empirical evidence demonstrates that their film tax credit went to fleeting, short-term economic activity.

West Virginia is not new to this discussion. A 2018 study from the West Virginia Legislative Auditor recommended the film tax credit be eliminated due to its “minimal economic benefit,” and, “questionable expenditures.” This special carve out had cost taxpayers millions while nearly 70% of the tax credit went to only three production companies. The audit also highlighted dubious expenditures that were permitted to count as qualifying expenditures, like the depreciation of paint and paper towel holders.

Over ten years West Virginia’s previous film tax credit generated less than $1 million dollars per year of economic impact to the state. Film production companies incurred over $49 million in direct and postproduction expenditures; however, wages paid to out-of-state residents constituted approximately $21 million of the expenditures.

Principled lawmakers were right to follow the recommendation of the 2018 audit and eliminated this crony scheme.

It is for these reasons, I urge you to oppose HB 2096.