By Matt Murphy
STATE HOUSE NEWS SERVICE
STATE HOUSE — Lawmakers could hardly have been more upbeat about Gov. Charlie Baker’s proposal to expand the earned income tax credit for low-income families on Tuesday, but the governor’s recommendation to pay for the program by eliminating tax incentives for the film industry has found many skeptics.
While the effectiveness of film tax credits has come under scrutiny around the country, the tax breaks for the burgeoning film production industry in Massachusetts have many defenders on Beacon Hill, including powerful House Democrats who say they’ve seen the benefits in their communities.
“What I don’t appreciate is (the governor) pitting one group of working class people against another by getting rid of the film tax credit,” said Cambridge Rep. Timothy Toomey. “I think it’s something we should be able to do both, not pitting one working class group against another.”
Housing and Economic Development Secretary Jay Ash testified before the Joint Committee on Revenue in support of Baker’s proposal (H 62) to double the earned income tax credit to 30 percent of the federal credit by 2019.
Ash said the earned income tax credit “could be the most effective anti-poverty program that we know,” estimating that by 2019 more than 480,000 low-income families could be eligible for the credit.
By increasing the average value of the credit from $937 to $1,873, the Department of Revenue estimates an increase in disposable income of about $196 million, and the addition of 1,000 to 2,000 jobs per year in the “near future.”
“We want to ensure to those eligible for the earned income tax credit that they know that poverty is temporary and the way to overcome it is by working through it,” Ash said.
To pay for the $136 million expansion of the EITC in the fiscal 2016 budget, Baker has proposed to eliminate the $80 million film tax credit program. Arguing that tax dollars are being used to support “Hollywood moguls,” Ash pointed to a DOR study that found in 2012 only $50 million of the $304 million in spending generated by the film industry went to in-state vendors and 74 percent of wages created went to out-of-state workers.
“The choice that we’ve made is to take something that isn’t working and use the proceeds to support something that is working,” Ash told the committee.
Comparing the film tax credit’s record of needing $119,000 in state subsidies per job created to the better performing credits, like those for life science jobs at $17,000, Ash said, “We’re not trying to pit people against each other. What we’re trying to do is get the best return on investment as possible.”
House Majority Leader Ron Mariano, a Quincy Democrat, called the Department of Revenue film tax credit report a “flawed study” that failed to take into account all the indirect jobs supported by having film productions in Massachusetts.
“I’m not into optics. I’m into results. And that’s the problem with the optics. How do I go to electricians from 103 that are working at the Fore River shipyard on movie productions and tell them that their jobs are going to go away,” Mariano said.
Mariano said the Legislature has “an awful lot of smart people” and should be able to find other programs or tax credits to scale back to pay for the EITC expansion.
“I think we see support in the House membership, and if you look at those panels you’ll see an awful lot of reps whose districts were affected by film productions, and so I think we have a broader base of support on the House side than probably the Senate side so I think our chances in the House are much better,” Mariano said of the chances to preserve the film tax credit.
Rep. Sarah Peake, a Provincetown Democrat, testified alongside Reps. Cory Atkins, Tackey Chan and Ann-Margaret Ferrante, agreeing with Mariano that DOR’s report is “far too narrow” and doesn’t account for the impact on tourism.
Peake recommended charging room taxes on vacation rentals, an issue she has pushed for years, as a way to pay for expanding the earned income tax credit. “We’re concerned about money leaving the state? This is money coming back into the state,” Peake said.
Ferrante, of Gloucester, spoke about actress Sandra Bullock proclaiming Rockport a favorite vacation destination after filming “The Proposal” there and the positive economic impact that “Wicked Tuna,” a show on the National Geographic Channel, has had for fishermen, charter boats and seafood restaurants.
“We don’t have the money to pay for that type of advertising,” Ferrante said, blaming Americans for Prosperity and the conservative Koch brothers for spearheading film tax credit repeal movements around the country.
Massachusetts Taxpayers Foundation President Eileen McAnneny testified in support of Baker’s bill, calling the film credit “highly inefficient” while she said the money spent on the earned income tax credit would largely flow back into the state’s economy. McAnneny cautioned that any expansion in the EITC should paired with offsetting revenue or budget savings, and should be administered carefully to avoid fraud or filing errors.
For all the critics of repealing the film tax credit, lawmakers went out of their way to applaud Baker for focusing on expanding the earned income tax credit.
“You’ll have trouble finding anyone in this room or quite frankly in this building that doesn’t think it’s a priority,” Sen. Benjamin Downing, a Pittsfield Democrat, said.
Mariano said the House almost proposed expanding the EITC program last year, but opted for the “cheaper version” instead when it voted to raise the minimum wage to $11 an hour over the next three years.
With the House’s budget due out in the next couple of weeks, Revenue Committee co-chairs Rep. Jay Kaufman and Sen. Michael Rodrigues said they were in “fact-finding” mode. Some lawmakers, including Rep. Majorie Decker, have proposed bills to go further than Baker and expand the EITC to 50 percent of the federal credit.
Outgoing Revenue Commissioner Amy Pitter also testified in support of Baker’s proposal, included in the EITC legislation, to offer a year-long tax amnesty program for first-time and non-filers, calling it an “important initiative” to draw business and individuals “out from the underground economy.”
The hearing in the State House’s Gardner Auditorium drew dozens of supporters of the film tax credit from the motion picture industry, unions and others wearing stickers that read: “Films=Jobs.”
Chris Byers, the director of operations and marketing for New England Studios in Devens, said Baker’s assertion that the film tax credit was not the main reason why production companies choose to film in Massachusetts is “simply not substantiated by the reality on the ground.”
Byers said the studio’s $35 million investment in a new building that opened last year was based on the availability of tax credits through at least 2023, and the studio is in talks to become home to one or more television series.
“The growing Massachusetts film business including the brand new New England Studios needs to be given a full opportunity to mature to self-sufficiency between now and the 2023 sunset date,” Byers said.
Byers, who also produces films, said motion picture and television productions in Massachusetts generate invaluable advertising for the state that would otherwise disappear with the absence of tax credits. Making a point that even Ash conceded in his testimony, Byers said without tax credits the volume of film work in Massachusetts would drop off significantly.
“Producers don’t even look at states without tax credits,” he said.