Connecticut is ready for its Hollywood close-up — but at what cost?
The movie industry’s glitz and glamour has lured lawmakers to introduce a new bill expanding the film tax credit, established by the General Assembly in 2006. However, the program is equivalent to a box-office bomb, failing to produce financial benefits to state taxpayers footing the bill.
In a 2019 report compiled by the Department of Economic and Community Development (DECD), the annual state revenue has decreased by more than $58 million, while the program has suffered a cumulative loss of half a billion dollars since its inception. Meanwhile, former DECD commissioner David Lehman called for a reduction or outright repeal of the film tax credit this past year.
Yet, as part of the legislation, productions would still be eligible for the same percentages based on the production costs spent in the state. Productions between $100-500,000 would receive a 10% credit; those between $500,000 and $1 million would receive a 20% credit; and those spending over $1 million would receive a 30% credit. The credit expansion would still fall short of New Jersey’s 35% credit.
Members of the industry voiced their support for the expansion, with Kathy Bañuelos, senior vice president of State Government Affairs of the Motion Picture Association, saying the credit has “served as a catalyst for economic growth.”
“Indeed, a state-commissioned study of the tax credit program by Olsberg SPI concluded that between 2012-2020, the tax credit helped to attract $2.72 billion of production expenditure into Connecticut,” Bañuelos testified. “Connecticut has successfully utilized its tax credit program to build a robust production industry. Raised Bill No. 6929 would build on this success and help maximize the [return on investment] to the state.”
But a study conducted by the University of Southern California contradicts Bañuelos’ claim, finding film tax credit programs are an overall “bad investment.” The report further states that such programs primarily benefit in “short-term wage gains, mostly to people who already work in the industry.” Additionally, insurance companies have been some of the biggest winners of Connecticut’s tax breaks, raking in more than $581 million.
Surprisingly, the film tax credit has received criticism from other government agencies, as well as from lawmakers and public policy outfits representing opposing ends of the ideological spectrum.
“This is already one of the most expensive tax credit programs in the state — having issued over $1.2 billion in tax credits between FY 2008 and FY 2022,” testified Jeffrey Beckham, secretary at the state’s Office of Policy and Management. “We have contributed quite a bit to this industry. Raising the credit percentage claimed against the Sales Tax as well is not advisable or desirable.”
Additionally, Connecticut Voices for Children, a progressive tax policy nonprofit, also opposed the program’s expansion, testifying, “According to the state’s own pre-2022 broad economic impact analyses, Connecticut lost an average of nearly $80 million a year in revenue from the film tax credit program, which more than offset the average total gain from the other major business assistance tax credit programs.”
Meanwhile, a group of House Democrats advocated phasing out the program, and Yankee Institute’s Bryce Chinault testified in opposition of the bill. The latter, however, also implored the Finance, Revenue and Bonding Committee to consider another, more beneficial tax credit — one that would help children from low-income households thrive in Connecticut’s K-12 classrooms.
Presently, the film tax credit remains off the ‘cutting room floor’ as the bill was voted out of committee on April 19; it now awaits a vote by the General Assembly.