Economists divided on value and impact

The Motion Picture Assn. of America is seeing bright red over a new report that attacks the very notion of state film subsidies.

“It’s junk research with a political agenda,” huffed Vans Stevenson, the MPAA’s senior VP of state government affairs.

The report, issued Nov. 17 by the Center on Budget and Policy Priorities, asserted that the credits are “wasteful” and elitist because they reduce funding for services such as education, health care and police and fire protection.

“The benefits to the few are highly visible,” said report author Robert Tannenwald. “The costs to the majority are hidden because they are spread so widely and detached from the subsidies.”

Tannenwald asserts that supporters of the subsidies — which he calculates as totalling $1.5 billion in fiscal 2010 — rely on “biased” studies that find incentives are cost-effective drivers of economic activity. “The most careful, objective studies find just the opposite,” he said.

That’s the rub, it seems: There’s no unanimity among economists as to the benefits of subsidies.

Tannenwald contends that states would be better served by freeing up the incentive funds for public services and investing in education, job training and infrastructure.

“Effective public support of economic development may not be glamorous,” he added. “However, at its best, it creates lasting benefits for residents from all walks of life.”

Stevenson dismisses the 15-page report and questions Tannenwald’s credentials.

“This is typical of think tanks,” he says. “He’s ignoring the fundamental research by reputable firms like Ernst & Young and he has no experience in this area.”

Stevenson’s stats say the film and TV industry supports more than 2.4 million jobs and generates about $13 billion in taxes and $40 billion in payments to vendors, suppliers and others nationwide.

And the Massachusetts Film Commission came to the defense of tax credit programs, asserting, “Without exception, every major study of every film tax credit program in every state in the country has reached the same basic conclusion: The benefit to the private economy far outweighs the public cost of the credit.”

The commission insisted that the ratio of benefit to private economy vs. public cost of credit was anywhere from 4:1 to 10:1. “In Massachusetts, through the end of 2009, taxpayers paid out just over $100 million in credits in order to bring more than a billion dollars of new direct production spending to the state’s economy,” it said.

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