October 17, 2011

Oklahoma Film Industry Backs Tax Breaks

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OKLAHOMA CITY – Supporters of Oklahoma’s fledgling film industry on October 12 defended rebates used to attract movie makers to the state.

But Joseph Henchman, vice president for legal and state projects with the Tax Foundation, said governments lose revenue through the rebates because they don’t create enough jobs to offset the cost.

The comments came during a meeting of a task force studying tax credits and economic incentives. The panel will issue recommendations to lawmakers about which incentives are ineffective and should be eliminated.

“Independent studies that have estimated the impact of film spending calculate that state governments recapture only between 8 cents and 28 cents in new revenue for every dollar of tax credit,” Henchman said. “That is, these programs lose governments between 72 cents and 92 cents for every dollar spent on them, even after accounting for increased economic activity generated by film production.”

Oklahoma sets aside up to $5 million annually to provide a rebate of up to 37 percent of the Oklahoma film production cost.

Henchman said states are highly competitive in attempting to attract the industry. Oklahoma’s $5 million program is modest.

“Even so, $5 million in film production subsidies is $5 million not going to other priorities,” he said.

Jill Simpson, director of the Oklahoma Film and Music Office, defended the rebate program, saying it creates jobs and economic activity in communities.

In addition, the rebate program helps diversify the state’s economy, she said.

“Eliminating or cutting incentives will gut the Oklahoma film industry.”

Simpson said the state gets a 3-to-1 return on the rebate program. If the rebate is eliminated, jobs and industry created by it will be ceded to other states and countries, she said.

Keeping the program will grow the infant industry and create portable jobs that move around the state and boost state and local economies, Simpson said.

Henchman said: “I know it is a hard sell to suggest that Oklahoma taxpayers stop subsidizing Hollywood production companies and perhaps pass on the glitter and glamour of big film productions. But Oklahoma residents might be better off if they keep their money, sit back, make some popcorn and enjoy films that taxpayers in other states are footing the bill for.”

Meanwhile, Rep. David Dank, R-Oklahoma City, chairman of the task force, said he thinks the panel should ask the attorney general about a proper procedure to get the Oklahoma Supreme Court to issue a ruling on the legality of many of the tax credits and incentives.

“I think we need to get that process of testing these tax credits before the Supreme Court under way, and I would welcome the task force’s input on how best to proceed,” Dank said.

Oversight of the tax credits is inadequate, the chairman said.

We have reviewed enough of these tax credits so far to know that the controls and safeguards in place are often a joke,” Dank said.

“In many cases, they are almost nonexistent.”

Read how tax breaks are putting Oklahoma films in the spotlight