ADVERTISEMENT

As Some Seek to Hike Pennsylvania's Film Tax Credit Programs, Others Question Its Economic Value

Tom Killion
Tom Killion
February 9, 2019

Pennsylvania state Sen. Tom Killion is renewing his push to see the state’s film tax credit program expanded. He has introduced legislation that would dramatically increase the size of the program from $65 million a year in tax credits to $125 million.

"Our film tax credit program is incredibly successful," Killion, R-Brookhaven, said in a statement Monday. "It’s so successful that we have many movie, TV and commercial productions interested in locating here, but we reach the cap on the tax credit shortly after it’s authorized."

The timing of Killion’s outreach on behalf of his bill comes less than two weeks after the new Performance-Based Budget Board heard a report from the Independent Fiscal Office that led some board members to question the value of the state’s tax credit programs.

Killion, citing a report from the Department of Community and Economic Development – the agency that oversees the film tax credit – argued that the program generated $4.5 billion in economic activity from 2007 to 2018 and directly supported 21,000 jobs in the state.

The senator argues that over the past two years, 30 film projects worth a combined $400 million have opted not to locate in Pennsylvania because the existing film tax credits had already been allocated.

"I have repeatedly heard that we’re losing too many important projects to other states that have a higher tax credit cap or no cap at all," Killion said. "These are missed economic opportunities for us."

During the Performance-Based Budget Board hearing on Jan. 24, however, lawmakers and officials questioned whether a direct line can be drawn between tax credits and economic activity. IFO Director Matthew Knittel at that meeting also noted that the benefits don’t always stay within the state.

"We … know that about 40 percent of the new spending flows out of the state to nonresident actors," Knittel said.

Knittel did argue that the tax credit was not large enough to cause Pennsylvania’s film industry to grow, noting that competition between states had made production companies -prone to choosing their locale by the availability of credits.

"Currently, we do not think the credit in Pennsylvania is sufficient to grow the industry to expand it," Knittel said. "We think we're retaining jobs that would be lost otherwise, but due to the very high competition from other states, notably Georgia with a very high film tax credit, the industry is currently not expanding."

Georgia’s annual film tax credit program is capped at $533 million, Knittel said.

A report Monday from the nonprofit Commonwealth Foundation also called into question the value of the film tax credit. Vice President and COO Nathan Benefield cited the IFO’s numbers showing that Pennsylvania gets back just 13 cents for every dollar it spends on the tax credit.

"Despite the poor economic justification, tax credits get support because they are good politics," Benefield wrote. "It’s a lot of fun subsidizing Hollywood celebrities, even if it doesn’t create jobs."

Killion argues that if Pennsylvania doesn’t raise its film tax credit to the levels seen in other states, more and more productions will choose to locate elsewhere.

"We need to help Pennsylvania’s economy and workers by becoming more competitive with the tax credit programs in other states by raising the cap here," Killion said. "I’m hopeful we’ll do so during our current two-year legislative session."

Published under: Taxes