Hollywood is celebrating this weekend. Harry Potter and the Deathly Hallows Part 2, the final installment of the boy wizard series, is already breaking box office records.
But that might be the last good news for the U.S. film industry for a while.
We're well into the summer movie season, heading into the last half of the year, and the total movie ticket take is down by 8.3 percent from last year and 5.9 percent from 2009, according to the box-office-tracking website boxofficemojo.com.
And the outlook isn't much better for state film and television production tax breaks.
Still golden in California: Sure, California, home to Tinseltown, seems happy with its tax investment in the industry.
A recent report by the Los Angeles County Economic Development Corporation found that since its enactment in 2009, California's Film and Television Tax Credit has generated more than $3.8 billion in economic output and is supporting more than 20,000 jobs in the Golden State.
Several other states, however, have been rolling back their film and TV tax credits.
The Tax Foundation has been following production tax breaks for years and its research indicates that the tax incentives probably peaked in 2010. That year, says the Washington, D.C., nonprofit, a record 40 states offered $1.4 billion in film and television tax incentives.
And as states cope with current fiscal crises, lawmakers are now balking at subsidizing productions.
Film tax breaks out: The programs have been eliminated or are in the process of being phased out in Arizona, Arkansas, Idaho, Iowa, Kansas, Maine, New Jersey and Washington.
Iowa in particular had a terrible time with its now defunct film program, with several criminal charges lodged in connection with allegedly fraudulent tax credit claims.
And an effort in Nevada to create a tax incentive program to lure productions there never even got off the ground.
In addition, says the Tax Foundation, film and TV tax programs are being pared back or challenged in Alaska, Connecticut, Georgia, Hawaii, Michigan, Missouri, New Mexico, Rhode Island and Wisconsin.
Bad tax scenes: So what happened? In large part, the tax breaks are yet another victim of a sluggish economy. As states saw revenues drop, they were forced to make decisions on which programs to keep and which to cut.
But in many cases, the tax incentives simply didn't fulfill their promises.
An earlier Tax Foundation study found that the credits too often were "based on fanciful estimates of economic activity and tax revenue" that in many cases instead provided state treasuries with "small returns [on] unnecessary risks with taxpayer dollars."
"In short, while film incentive programs were once universally applauded as great economic development tools and tourism boosters, their merits are now being rigorously debated," say Tax Foundation researchers.
That's a debate that should continue even after the economy and the film industry recover.
- And the Oscar, and tax break, go to...
- More states balking at subsidizing outrageous films
- Hooray for Hollywood tax breaks
- Scary! Tax breaks for filmmakers
- Oscars idiocy and a half-hearted hooray
for Hollywood tax breaks
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