State lawmakers today could take one of their first votes of the year on tax breaks - not to reduce them, as unions and liberal groups are loudly calling them to do, but to extend and expand one of them.
The tax credit in question – for the film and television industry – is popular even as a $4.6 billion budget shortfall looms. It enjoys support from business, labor and legislators across the political spectrum.
States see themselves in a bidding war to lure movies and TV shows, with 44 states offering incentives.
In Washington, where officials are still frustrated that the “Twilight” cast and crew went to Oregon and British Columbia to shoot their movies set on the Olympic Peninsula, there is a push on to keep the state’s $7 million tax-credit program from expiring July 1.
“It’s a tough year. It’s very hard to say we’re giving a tax credit, but the return, I think, is good,” said Rep. Phyllis Gutierrez Kenney, D-Seattle, “and I think you have to create the jobs in order to get out of the recession.”
But budget worries are already causing the proposals to be scaled back. And even in a smaller form, it’s unclear how budget writers will view the extension.
Without renewal of the credit, the already small film industry in Washington would evaporate, lawmakers heard this week from Becky Bogard, chairwoman of Washington Film Works, the nonprofit created by the Legislature to replace the state film office.
As they consider deep cuts, budget writers are looking with a skeptical eye at every request for tax breaks, budget chairman Ross Hunter said, and scrutinizing the statistics behind every claim that business will flee the state.
“‘Sleepless in Seattle’ – did they have the credit then?” Hunter asked rhetorically. The movie preceded the tax break by 13 years.
Hunter, D-Medina, said he hasn’t yet examined the proposal for expanding Washington’s credit. But he has taken a look at research by the Washington, D.C.-based Tax Foundation. The group concluded that Hollywood, not states and businesses, tends to benefit in the long term from state tax breaks.
Kenney said lawmakers can save jobs by extending the tax credit until 2017 and add to the work force even more by increasing the amount handed out in credits.
She and Sen. Jeanne Kohl-Welles introduced bills that would double the $3.5-million-per-year tax credit, then eventually triple it. But both said they expect to scale back the proposal.
Kenney will seek instead to gradually increase the tax credit to $5.5 million per year, with the possibility of more increases in future years.
The House committee she chairs could modify and advance her bill as early as today. A vote is also scheduled today in the Senate committee chaired by Kohl-Welles, though it could be postponed. Both are expected to approve the bills.
“I would like to do a lot more,” said Kohl-Welles, a Seattle Democrat. She said if the credit expires, film companies wouldn’t come to the state, so the state would never collect the taxes. “I think it’s a true incentive that has no cost to the state budget overall.”
A legislative audit of the state’s film program found there were 1,629 film-industry jobs in 2009, nearly unchanged since 2006, when the Legislature created the tax break.
Staying steady is a victory for the industry because other states have upped the ante with more tax breaks, according to the report from the Joint Legislative Audit and Review Committee, which recommended extending the tax break.
The job numbers reported by the audit committee are a snapshot in time and don’t reflect year-round employment . The production companies also submit information on jobs, but the statistics they report are unreliable, lawmakers on the audit committee found.
Kenney and Kohl-Welles said their bills may be changed to add more reporting requirements as recommended by the audit committee.
The push for expansion contrasts with some interest groups’ strategy to call attention to the hundreds of exemptions and loopholes in the tax code and end some to avoid deeper cuts. Some liberals in the Legislature, like Kohl-Welles, agree tax breaks should be examined and those not working should be eliminated.
Use of the incentive is increasing every year, Bogard said. It’s not enough to meet demand. The money for this year’s tax credit likely will be used up by June, she said.
“This is a classic dilemma that they have this session,” Bogard said. “They obviously need to take care of basic social-service needs, but they also can’t get rid of every program that helps create jobs.”