May 14, 2007

Louisiana: More Tax Breaks for U2?

As the Louisiana Tax Blog noted back in March, Louisiana's tax credit for film-making activities has come under scrutiny in some quarters this year. A tax proposal that made intuitive sense to some when Louisiana was one of the few states doing it-- giving tax breaks to movie-makers to encourage them to film in Louisiana rather than in other states--now seems less obviously good when dozens of other states are providing essentially the same tax giveaways.

But now, as the Associated Press' Melinda Deslatte documents, the Louisiana legislature is considering taking the next step: offering tax breaks to musical and theater productions. Rep. Jeff Arnold, a Democrat from New Orleans, has introduced HB 155, which would provide refundable tax credits for "musical or theatrical productions" that employ Louisiana workers.

There are lots of sensible questions to ask about such a credit. Start with two: What kind of productions should benefit? And how we do know the incentives will actually change these production's behavior rather than rewarding them for something they would have done anyway?

"Musical or theatrical productions" covers a pretty broad swath of the cultural spectrum. The bill's language says this term "shall include but not be limited to drama, comedy, comedy revue, opera, ballet, jazz, cabaret, and variety entertainment."

Does this mean that when Jerry Seinfeld brings his comedy show to Shreveport, he'll get a tax credit for doing so? That the Rolling Stones will be subsidized to appear before college students in Baton Rouge? That famed tax-avoiders U2 will get yet another tax bonus if they rock New Orleans? Apparently they will, as long as Louisiana marks the first stop on their US tour.

And what happens when neighboring states do exactly the same thing? In testimony before the Ways and Means Committee, bill booster Roger Wilson, the chairman of something called "Broadway South, LLC" argues unconvincingly that "no other state... is offering a similar incentive" and that no other state has the infrastructure in place to meaningfully offer similar incentives"-- and admits in the same breath that Louisiana has virtually no musical/theater industry to begin with. He doesn't make much of a case for why Texas or Mississippi can't productively enact exactly the same credit next year.

Wilson also compares the intended impact of the theater tax break to the alleged impact of the existing film tax break in a way that makes the motives of this giveaway seem pretty craven:
Any movie that’s made in Louisiana as a result of the initiatives you passed years ago is basically stolen from other cities... We want to propose an initiative that will do the same thing[for musical and theater productions.]
This is what economic development experts like the folks at Good Jobs First are talking about when they decry the "race to the bottom." When states or cities use tax incentives to simply steal investment from other states and cities, the net impact on the US economy is, at best, zero. The same investments are taking place-- just in a different place than they used to be. And if the tax breaks in question are encouraging companies to invest in an area that simply wouldn't make sense economically otherwise, the net impact on the US economy is arguably negative. Theater companies would be moving from a place that makes sense economically to a place that doesn't.

It's not popular to argue that the leeway given state and local lawmakers to provide tax incentives should be curtailed in the name of a more effective national economic policy. We all value state and local autonomy very highly. But listening to this sort of blatant job piracy gives one a lot of sympathy for imposing such limits.


At 1:00 PM, Anonymous Anonymous said...

The credits only apply if the tour or production starts it U.S. Tour in Louisiana. If U2 starts their tour in Louisiana then they may apply for credits if they meet all the spending and hiring of Louisiana employee requirements. The credits only apply for that money spent in Louisiana.


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