Why Cap Growing Film Industry?

Dan Mayfield, a columnist in the Albuquerque Journal, writes in today’s paper about New Mexico’s growing film industry and argues that policymakers should keep the spigot open by not limiting the amount of money the state dishes out.
You see, the current rebate program pays up to 25 percent on all direct production expenses that are subject to taxation by the state. So, if your film company spent $20 million here, you could get a $5 million rebate. This is a refund, not a credit, on the full amount of the expenditure, not just the tax portion. When you think about it, that is an amazing subsidy and it is coming out of taxpayers’ pockets whether the film makes any money or not.
Sure, the film office estimates that the industry has spent $496 million here since January 2003, but what industry would not grow and spend more money if taxpayers reimbursed it for 25 percent of their expenses? No one knows, but I can say with relative certainty that New Mexico would have been better off, instead of spending $70 million over the last five years and offering generous tax breaks to the film industry, if that money had been returned to the economy through a broad-based gross receipts or income tax cut.
Unfortunately, when taxes are cut across the board and equally for everyone, it is more difficult for politicians to take credit for the creation of a new industry out of whole cloth. Thus, while Richardson ran for President on his targeted tax credits, he left out the positive impact of his income and capital gains tax cuts (even though some hikes offset those cuts, they were still more economically beneficial than any tax credit).
Politically, it looks like generous film subsidies are here to stay. The industry has these policies in place and is going to be a powerful force. It will be interesting to see what the state’s cost-benefit analysis looks like.