Louisiana Woos Movie Industry With Tax Credits
RENEE MONTAGNE, HOST:
Louisiana is known as the pelican state, but it's now trying out a new nickname, Hollywood South. Thanks to some very generous tax credits more movies are filmed in Louisiana than any other state, California included. From New Orleans, Kate Richardson of member station WWNO has the story.
(SOUNDBITE OF FILM, "21 JUMP STREET")
ICE CUBE: (As Captain Dickinson) There's a new synthetic drug at Seguin High. The mission is find the supplier.
CHANNING TATUM: (As Gregory Jenko) I think the dealers...
KATE RICHARDSON, BYLINE: The movie "21 Jump Street" is about cops busting high school drug dealers. Believe it or not, this movie has a connection to the Dow Chemical Corp.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED WOMAN: Dow elastomers - global capabilities for flexible membranes.
RICHARDSON: The connection isn't just synthetic substances. The movie and the company both benefit from Louisiana's motion-picture tax credits. For the last five years, the state's been luring filmmakers with tax credits worth 30 percent of production costs. Chris Stelly is the executive director of Louisiana Entertainment, which runs the state's program.
CHRIS STELLY: It's quite, quite simple. You spend a dollar in Louisiana, we give you 30 cent back.
RICHARDSON: So here's how you get from motion pictures to petrochemicals. When "21 Jump Street" filmed here, producers spent about $42 million. They received tax credits worth more than $12 million. Most productions don't owe taxes to the state of Louisiana because their investors aren't based here. So they can transfer the credits back to the state at a discount, or they can sell their credits to other people who do owe taxes to the state.
STELLY: We retail tax cuts for motion picture industry, not just in Louisiana but around the country.
RICHARDSON: Will French runs a tax credit brokerage called Film Production Capital. He says brokers buy large blocks of credits from moviemakers at wholesale prices.
WILL FRENCH: And then the broker will hold the credits until tax season comes, and taxpayers are ready to purchase tax credits to pay their own taxes with.
RICHARDSON: That's how you get to Dow Chemical, which has a massive operation in Louisiana. According to state documents, Dow Chemical paid $2.2 million for $2.5 million worth of "21 Jump Street's" tax credits. The difference is what Dow saved in state taxes. The film company turned its credits into cash. The broker made a bit of money, and Louisiana did not make any money in this transaction.
JAN MOLLER: This is a pure loss of tax revenue to the state that Louisiana can't afford at a time when we're having trouble paying for basic services like higher education and keeping emergency rooms open.
RICHARDSON: Jan Moller is director of the Louisiana Budget Project, a watchdog group.
MOLLER: If you're going to have a film program and you're going to subsidize films, that's one policy decision. But a byproduct of that shouldn't be an extra sweetheart tax break for people who have nothing to do with bringing film activity to Louisiana.
RICHARDSON: But that transferable aspect is precisely what makes Louisiana so attractive to big production, says Chris Stelly from the state's film office.
STELLY: The program wouldn't be successful under the current system without a healthy market for tax credits.
RICHARDSON: There's no question that big productions bring big money. But while top-actor salaries boost a production's spending figures and the size of the subsidy, they don't help the state's budget. Greg Albrecht is chief economist at the state's fiscal office.
GREG ALBRECHT: What's the goal? I mean, if the goal is for the state fisc to make more money than it puts out - well, no. You're not even coming close - never have been and never will. If the goal is to, you know, build a film industry and main - support certain industry sectors in the economy - well, yeah. Then I think it's a win in that sense. I mean, without this program, there wouldn't be any - for all practical purposes, there'd be no film production in the state.
RICHARDSON: There's no talk of getting rid of the tax credit and little talk of even reducing the subsidy. State lawmakers seem happy to keep paying out of the state's pocket for Louisiana's production boom. For NPR News, I'm Kate Richardson. Transcript provided by NPR, Copyright NPR.