Seminars On Government and the Marketplace
September 28, 2010
When and how should
government play a role in the marketplace? The School of Public Policy
and Urban Affairs, with support from the Office of the Provost, held the first
in a series of seven seminars to explore a question that often elicits more
heat than light. The seminar examined the broad role that state
governments play in fostering economic opportunity, using as its focus the
example of the Massachusetts Film Industry Tax Credit. It posed the
question, "Why do states offer tax incentives to businesses, and should they?"
Speakers included Dan O'Connell, President of the Massachusetts Competitive
Partnership and former Secretary of the Massachusetts Office of Housing and
Economic Development, and Peter D. Enrich, Professor of Law at Northeastern
University. Barry Bluestone, Professor of Political Economy at
Northeastern, moderated.
The Massachusetts film industry tax credit offers a 25% tax credit on every
dollar a production company spends to produce a film, television show,
commercial, video, or digital media project in Massachusetts. Production
companies may credit their tax savings to their personal or corporate tax
liability or redeem their tax credit in cash from the state at 90% of its
value. They may also sell their credit to another business, for example a
bank.
Secretary O'Connell emphasized both the tangible and intangible benefits of the
film tax credit. Tangible benefits include jobs for Massachusetts
residents as actors, set designers, lighting speciaslist, as well as in support
areas like set construction, transportation, and catering. Less easily measured
benefits include spinoffs for the state's tourism and conventions sectors,
which O'Connell argues are helped greatly when a movie features iconic images
of Boston, such as Fenway Park or the Charles River. Such images also add to a
"buzz factor" that enhances the state's overall image. In addition, the tax
credit extends to the "creative economy," which includes computer game design
and adveritising in addition to film, a sector Governor Deval Patrick has
targeted as key to the state's future economic growth. O'Connell says that the
administration emphasizes this industry, in particular, to take advantage of
and support Massachusetts' strengths in this creative arena.
Prof. Enrich noted that the Film Industry Tax Credit costs Massachusetts about
$150 million a year in out of pocket expenses for Massachusetts tax payers.
He argues that there is little empirical evidence that the tax credit
creates net jobs for Massachusetts residents, and that it is very hard to prove
that the credit has any spillover effects in attracting greater tourism and
conventions. Moreover, the film industry tends to be "footloose," moving on
when the shooting is done, so the credit does not lead to a long-term
investment. In short, Enrich argues, the film tax credit is bad economic
development policy. A sounder policy, he says, would be to use that same $150
million to support education and infrastructure improvements that would attract
business over the long term.
This series of "Government and the Marketplace" seminars are organized by
Nonnie Burnes, Senior University Fellow, and Chrisopher Bosso, Associate Dean
of the School of Public Policy and Urban Affairs. Next month's seminar on
October 26 will address government's role in creating access to basic services,
and will focus on the case of the Massachusetts Healthcare Connector.
Seminars are open to faculty, graduate students, and practitioners from
government and business. Visit http://www.policyschool.neu.edu/research/govtandmarketseminar/ for more information.
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