Testimony at Hearing on LD 55: An Act to Promote Filmmaking in the State

LD 55 is a tax break for media production companies. It is well-intended legislation, but it is more likely to be a loss for Maine taxpayers than it is to be a win. State film subsidies are perhaps the most classic, economic textbook example of poorly thought out race-to-the-bottom economic development policy.

Maine already has tax breaks for media production companies. You can read about them in three locations: The website of the Maine Film Office, the most recent tax expenditure report from Maine Revenue Services, and Title 36 of the Maine statutes.

Unfortunately, we have no idea how well they’re working or even how much they are costing the state’s General Fund. The tax expenditure report estimated that they would affect 20 “taxpayers” and cost the state anywhere from $100,000 to half a million dollars over the current biennium. What are state residents and taxpayers getting in return for this largesse to media production companies? We don’t know. We don’t have accountability standards for our tax expenditures.

The proposal before you today would dramatically expand the potential payouts for media production companies doing business in the state. A single large media production could cost the state up to $800,000 over four years.

Would movie productions eligible for these subsidies really be creating jobs in Maine? Would they have a lasting impact on the communities in which they film? Would these subsidies even have an impact on whether or not they decide to do business in Maine?

Again, unfortunately, we don’t know the answer to these questions. We don’t even know how our current incentive package is working. But we do have a lot of evidence from other states.

What we do know is that over 40 states offer film subsidies, compared to only a handful ten years ago. Filmmakers can now find generous handouts almost anywhere they go, including Maine. Intensifying our involvement in this beggar-thy-neighbor nonsense will get us nowhere. Research shows that many of the best jobs in film production would go to nonresidents, not Mainers. Any revenue generated by economic activity induced by film subsidies is likely to fall far short of the direct cost to the state. If this is our economic development strategy, we’re in trouble. We can do better.

Joel Johnson, MECEP Policy Analyst, testifying before the Joint Committee on Taxation against LD 55.