Even the Great DeNiro Can't Make This Rep Believe in Film Tax Credits

There was good stuff to be found in the State House News Service account of the April 22nd discussion on a proposed budget amendment that would have prevented companies from selling tax credits they earn by making movies and TV shows in Massachusetts.  I smiled my way through it.

Did you know that Robert DeNiro, the Academy Award-winning actor, has personally lobbied Angelo Scaccia, the state-rep-for-life from the Readville section of Boston, urging Scash to abandon his longtime opposition to the state's triple-barreled film tax credit, which incentivizes Hollywood producers to do shoots here?  (As the Massachusetts Film Office explains on its website: "Massachusetts provides filmmakers with a highly competitive package of tax incentives: a 25% production credit, a 25% payroll credit, and a sales tax exemption.")

Did you know that the House Revenue Committee is working on a new "package of revenue enhancements" to be rolled out at some unspecified point for action (or not) in the lower branch?

And did you know there's some kind of analysis of the film tax credit due to be served up on May 15?  (If I could, I'd make a reservation to read the first copy.)

Well, this is the kind of stuff you can learn if you're willing to wade through -- as I can't help myself from doing -- the thousands of words the State House News Service devotes to in-depth coverage of all that happens on the floors of the House and Senate.  At no time is this "work" more rewarding than when the legislature is putting together the massive state budget for the upcoming fiscal year.

The budget debate this year happened to begin with Scaccia, the longest-serving member, the Dean of the House, speaking on an amendment he sponsored, which, if ultimately adopted, would have prevented companies from selling their film tax credits, as they are allowed by law to do.  This selling is quite a business, with sales annually totaling in the tens of millions of dollars.  Scaccia has never been a fan of the film tax credit and he particularly hates that filmmakers can make a killing by selling them off, post-production.

Here's where I'll turn to the SHNS account of Scaccia's remarks that day:

“It seems that I am the lead-off figure every year when it comes to the taxable part of the state budget. I have discussed this issue in the chamber for probably the last six or seven years. This year, we have a new chairperson of Ways and Means (Aaron Michlewitz of Boston) and a new chairperson in the Committee on Revenue (Mark Cusack of Braintree). It is my intent to explain this amendment, especially to the newer members who have not heard me discuss this (during past budget sessions) for an hour-plus.

“I still don't think people understand what I say when we talk about the film tax credit. I am going to withdraw the amendments at the end because the gentleman from Braintree who is the new chair of revenue has said to this House that he is going to come back with a package, a package of revenue enhancements, or, in this case, maybe the ability to tax an industry that pays no taxes at all. In fact, this industry has such a great deal that they accumulate over the years tax credits, which they sell (at) 90% value to insurance companies, banks, etc. etc.  

"So, the banks and the insurance companies pay less tax than other people and these folks who run the film industry walk away paying nothing – nothing! --to the people of Massachusetts. I can't understand for the life of me why we allow one of the richest sectors in the United States of America to come here, make tons of money, and pay nothing to the people of the Commonwealth of Massachusetts. I must be missing something."

“From 2004 to 2010, they paid a total of (only) $3 million to the Commonwealth. But that wasn't good enough. In 2010, this legislature came up with two, not one but two, tax credits: one 25%, which is unheard of, for production, and one 25% for wages.

“I use my dear friend who used to call me before and now does not; his name is Robert De Niro. I don't know if you younger folks have heard of the gentleman. He would come in here, make a film in less than two weeks, and walk away a multi-million-dollar winner -- and pay the donut in taxation to the people of this Commonwealth!

“I can't understand how we as a body have allowed over the last nine years the accumulation of $863 million in tax credits that they (the film industry) sell on the open market to the largest corporations in Massachusetts. They not only don’t pay taxes, they make $863 million in transferable tax credits. How would you like to be in a business like that?

“Now, my dear friend who will come to the microphone after me, the gentleman from Quincy (House Majority Leader Ronald Mariano), at least he is consistent. He doesn't think we should tax these folks at all. He also doesn't think we should tax millionaires in the Commonwealth. At least he's consistent: he is against taxing people who make a ton of money. I prefer that honestly, people who want to tax people who make more than a million bucks a year and who live here and pay all the other (state) taxes, etc., to these folks who come and go like the winter snow. They drift from place to place and think they beautify the scenery with their darling angel faces. It is not fair and it is not right.

“I will give (time to) the gentleman from Braintree, who has come before this House and said we are going to look at the total tax package in the Commonwealth of Massachusetts.  And I want him to know I am coming back. It is one thing to tax people here more than they are being taxed. It doesn't make sense not to tax people who don't even live here.

“Eighty-seven percent of the jobs (in the local film industry category) come and go.  They don't stay. There are people who are in this industry and could continue to work in this industry without the large tax breaks they get. Could you imagine if every business in Massachusetts not only didn't have to pay taxes, but also got credits and turned those credits into $863 million, the accumulated amount since 2010?

"There is a report coming out May 15 -- I wish the (House) budget didn't come out before then -- with a new analysis on this issue. We haven't seen yet how much more money we are going to give in tax credits in the next two years.

"There was a blockbuster film ('Patriot’s Day') that came out a couple years ago displaying one of the greatest mayors in America, a kid from Readville by the name of Tom Menino. That film is going to cost us a lot of money in tax credits. Interesting (that) we pay people who are actors and actresses, who play someone else in a (movie) role, and they walk away rich folk.

"I hope that someday very shortly we're going to end this giveaway and we're going to come to our senses. I looked at the budget this year and we have baseline tax growth for FY2020 at $1.26 billion. And, at the same time, there are six (new) items in the budget that total more than that amount. Six items! Technically, we're in a deficit.

"We can't afford to lose revenue because I don't know if the appetite in this House is to come forward and tax the people who live here more money in the future. I think it's needed. It took me an hour and 20 minutes to get here this morning from Readville, which is nine miles away. [Note: This refers to the need for massive upgrades to the state's transportation infrastructure.] 

"I think the young man from the North End (Aaron Michlewitz) did a great job for the City of Boston, especially when it comes to charter schools.   In two years, the (state’s) whole Chapter 70 (public school education allocation) would have gone to pay for charter schools alone and he recognized that issue. He has risen to the occasion and is taking steps to improve that...

"There is the story of the great meal in the New Testament where the loaves and fishes were multiplied by the thousands. That's pretty much what the last three chairmen (of the House Ways & Means Committee) have done in the last few years. They have performed in a miraculous way to keep us afloat. But it is issues like this (film industry tax credits) that create pain for us, financially. It is people who are rich and do not even live here. I won't get into that stuff about Hollywood and the folks that are out there, but I'll tell you some of them are not paragons of virtue."

Here's Majority Leader Ronald Mariano's rejoinder to Rep. Scaccia, as recounted by the SHNS:

 

"I do take a bit of an issue with the gentleman. I hope I can help him understand why I feel that this is an important economic driver in the Commonwealth. I certainly understand his longstanding objection to this (the film industry tax credit)…

"We have a real philosophical difference on this. It is very difficult to determine the benefits because of the ancillary industries that are created because of the films that are being made here. They are here consistently, and, as we move into a new era in entertainment where there is a need to fill hours and hours of TV content, you are seeing series being filmed here so these people are staying.  They are not in and out. We're trying to get these jobs here, and if you visit the soundstage at Devens, you will find it is booked solid and the average salaries are pretty good.

"We (Mariano and Scaccia) can almost give each other's testimony on this, we've done it so long. I'm not going to get into an awful lot of reading, but I want people to know how many colleges have developed film programs to educate a workforce which will be housed in Massachusetts. Over 260 cities and towns have directly benefited from productions. I have 'Imagine' magazine at my desk, a magazine of the film industry. I want to take a minute and talk about some of the ads here from small Massachusetts companies. One is a CPA firm in Braintree that I'm familiar with; there is a Maynard lighting company; there is Clocktower Associates, but I don't know exactly where they are. We have two pages of small ads to deal with catering, lighting, trailer rentals, costume cleaning, agents, photographers, and more. All of these are a direct result of the film tax credit that has not been measured in any of the statistics I've seen from the (Massachusetts) Department of Revenue. They have not done that outreach. We are not really comparing the direct benefits with the cost of the tax credit. That is where we have our disagreement.

"I did see the movie the gentleman mentioned with the mayor (Menino). It was an outstanding movie. We get benefits; the benefits go to the small businesses of Massachusetts. All of these businesses exist or prosper because of the film tax credit. We will, I hope, be able to have this discussion further as we move to a wider and broader discussion of revenue going forward.

"I applaud the gentleman's (Scaccia's) decision to wait and see what the revenue options are on the table as we move forward. Thank you."

Here's Rep. Ann-Margaret Ferrante, House chair of the Joint Committee on Economic Development and Emerging Technologies, amplifying Leader Mariano's remarks and providing a spirited defense of the film tax credit, based at least partially on how the program has been a boon to Cape Ann:
 

"I rise in opposition to the amendment and I want to clarify some of the words that were spoken to the effect that no taxes were paid. It is a 25% payroll or production credit. As the gentleman from Quincy said, think of the investment of an industry being built here.

"Right now, 4,000 students in Massachusetts are studying in fields related to the film industry. We have created an industry here. I can show any (House) member this cluster map that we have developed showing what has been filmed in Massachusetts and the other benefits.

"Let's talk about New England Studios: $41 million in investment and potentially five series being filmed in Massachusetts.

"We created 10,000 jobs from 2006 to 2012.

"When the gentleman from Readville said, Can you believe an actor could walk away with that much money, what that shows me is that there is someone out there who wants to pass judgment on the employment of others.

"If someone wants to be an actor and is successful, far be it from me to criticize their job. These productions spend significant amounts of money per day in our towns. In my district alone [Gloucester, Rockport, Essex], we had movie companies come in and rebuild critical town infrastructure in order to film there, and to be a good partner.

"I think the film tax credit is a wise investment and encourage members to vote in opposition to this amendment."

The discussion on the amendment ended here.  True to his word, Rep. Scaccia withdrew the amendment, meaning he killed his own idea, for the time being.  Debating the merits of the film tax credit is one of those Beacon Hill arguments that never ends.