Economic Ignorance: The Film Industry’s Best Weapon

Trip Jennings of the New Mexican recently interviewed several legislators and Gov. Martinez about film subsidies and other potential tax hikes. I thought the article was reasonable, but clearly showed the ignorance of basic economics and tax policies of certain legislators, particularly Brian Egolf and Michael Sanchez.

Both of these legislators attempt to conflate tax collections foregone (basically, any business tax incentive for any other industry besides film) and direct expenditures. The difference is that Union Pacific, for example, if they build a rail yard in Santa Teresa, may receive some tax breaks. But that does not directly cost the state or taxpayers anything (in fact, they’ll pay other taxes). The film industry, on the other hand, gets checks from the state for far more than they ever pay in taxes.

How do I know this? Even if we assume that the industry’s numbers are correct and that it brings in $500 million in economic activity, the industry costs taxpayers $70 million. With a state GRT rate of 5% and personal income rate of 4.9%, that $500 million in economic activity earns at most $25 million in tax revenue….so we’re giving away $70 million to get $25 million? That’s apparently what Egolf and Sanchez (and others) want.

The oil and gas industry, Union Pacific, grocery purchasers, and others who receive breaks against taxes that would otherwise be collected are not costing the taxpayers of New Mexico a cent, so policymakers should stop playing word games.