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.
– Courtesy of CSSH Dean’s Office