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Cash-poor states vie for film shoots

MANY American states that are cutting spending on schools, roads and other basics have been lavishing hundreds of millions of dollars in incentives on Hollywood studios to lure TV and movie productions -- this, despite scant evidence that US taxpayers come out ahead on such deals.

An Associated Press survey found that states competing for projects handed out US$1.8 billion in tax breaks and other advantages to the entertainment industry from 2006 through 2008.

Several states have even sweetened incentives recently or are considering doing so, for fear that if they don't land the next major motion picture, someone else will.

"The industry has been able to play off North Carolina against South Carolina against Louisiana against Georgia. Louisiana raises its incentives, and it puts pressure on South Carolina, North Carolina and other states to do likewise," said Bob Orr, a former North Carolina Supreme Court justice who heads anti-incentives group the North Carolina Institute for Constitutional Law.

Some states argue that the tax breaks pay for themselves in revenue. Many others contend that even if tax revenue takes a hit, the film industry boosts their economies with an infusion of cash and jobs.

Production firms spend money on sets, props, caterers and salaries for actors, extras and crew members. Movie crews eat at restaurants and stay in hotels while in town.

Movie shoots can also give a place a little Hollywood glamor, which can, in turn, boost tourism -- something that happened in Durham, North Carolina, where the 1988 comedy "Bull Durham" was shot, and in Savannah, Georgia, the setting of the 1997 film "Midnight in the Garden of Good and Evil."

New Mexico and New York commissioned studies by the accounting firm Ernst & Young that found the tax credits pay for themselves by producing more revenue than they sacrifice. The studies' authors estimated that state and local governments in New Mexico brought in US$1.5 in revenue for every dollar spent on tax credits, while state and local governments in New York State and New York City generated US$1.9.

But many economists and policy analysts who have studied the issue independently contend that tax breaks for the TV and movie industry are rarely break-even deals for states, in part because the jobs created are often short-lived. Even the revenue departments in some states would agree.

Connecticut's revenue department, for example, found in 2007 that every dollar in tax credits generated only 20 US cents in new tax revenue. Connecticut gave away an estimated US$70 million in tax revenue that year.

"The credit does not 'pay for itself'," Jennifer Weiner, a policy analyst for the New England Public Policy Center at the Federal Reserve Bank of Boston, wrote in a January report about Connecticut's incentives. "Increases in economic activity spurred by the film credit generate some additional tax revenue for the state from a variety of sources. This additional revenue is likely to offset some, but not all, of the initial cost of the credit."

The AP surveyed the 41 states, plus the District of Columbia, that offer rebates, grants or tax credits to cover production costs for movies, TV shows and commercials, and found they committed US$1 billion last year alone.

New York was the leader in 2008, giving away or pledging US$275 million in tax credits to productions that shot in the state that year.


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