Congratulations fellow North Carolinians, you are about to forfeit an untold amount of tax revenue to the millionaires at Warner Brothers – again – while the state faces a budget deficit upwards of $3 billion. Governor Perdue (D) announced in a press release last week that New Line Cinema, a subsidiary of Warner Brothers, will film a multi-million dollar motion picture in our state and will enjoy a 25% tax credit on qualifying expenses.
This summer, the General Assembly voted to expand the film production tax credit from 15% to 25%. The bill, HB1973, was a wish list of economic incentives (read: unfair tax treatment) sponsored by Reps. Bill Owens (D-Pasquotank), Pryor Gibson (D-Anson), William Wainwright (D-Craven), and Harold Brubaker (R-Randolph). Interestingly, the bill also created a tax exemption for wood chippers.
Warner Brothers also produces “One Tree Hill,” a television series, in North Carolina. The cost of credits to the state over the three tax years from 2007-2009 for One Tree Hill totaled $12 million. As a note, the total cost of credits to the state for those three years was just short of $36 million. Several of these films are rated R and one especially egregious film, with a cost of credits totaling $713,104, is titled “A Good Old Fashioned Orgy.” Meanwhile, North Carolinians have suffered sales tax hikes, higher fees, and income tax surcharges. The General Assembly raised taxes by $1.1 billion in 2009.
Further, businesses in other industries which have operated in North Carolina for years are subject to the full tax burden while Warner Brothers enjoys preferential tax treatment. Governor Perdue seems to think that “North Carolina was selected because of the state’s talented and trained film professionals and the water tank at EUE/Screen Gems.” Those of us in reality know that the state used our tax dollars to bribe Warner Brothers.
Proponents of the film production credits will argue that the preferential tax treatment the multimillionaires in California enjoy at our expense will boost the economy. However, these tax credits come at a cost as the loss in revenue must be offset by taxes on other goods and services paid by local businesses and individuals or by cuts to services such as education. What North Carolina needs to stimulate economic growth is an equitable, and much less onerous, tax structure. How can our political leaders claim to be for the “little man” when Average Joe is taxed to make up for the tax breaks enjoyed by wealthy Californians? Whose side are you on, Governor Perdue?
Do you know just HOW MUCH MONEY was spent in NC to qualify for these incentives? A LOT!! If the production is getting 12 million back – that means they’ve spent 48 million dollars IN NC!!! Its THAT simple. Money is spent on most importantly – hiring NC crew and actors to work on these productions. These production companies also spend money on hundreds of businesses in the state while they are here – hotels, restaurants, catering services, rental car agencies, etc.. This economic development incentive helps a whole lot of us North Carolinians continue to live and work in our home state. Its not about making movie moguls rich – its about creating jobs in NC and boosting our economy. Also – do you know how much is spent annually in NC by folks visiting Wilmington to see where the OC was filmed – or any other movie that resonates with them (Last of the Mohicans, Dirty Dancing, etc). Do some research and stop trying to make Gov. Perdue look bad for helping North Carolinians keep and recruit JOBS. That’s the bottom line folks – its JOB development. If you’re against job creation – go ahead and be against all incentives. Focusing on film incentives is just a lame way to fire up some people that are somehow against the entertainment industry. (And – for the record – I cannot fathom how anyone who OWNS and watches a TV being against the entertainment industry, much less the millions that it brings into our economy and the jobs it creates.) Its not just R rated films that shoot here and benefit – it includes family films and religious programming. AND – the fact that you want to call out an R-rated film just because of its title? RIDICULOUS!! Its a silly film made by some folks from Saturday Night Live. A film incentive – like any other incentive is helping to create jobs. Many businesses receive incentives – and the difference between other more traditional incentives and the film incentive is that the film companies get NOTHING – ZERO DINERO up front (like other businesses). They get their rebate AFTER they actually spend money here and can account for it. Find a REAL issue to be concerned about.
Mr. Davis,
What of equitable tax treatment? Should North Carolina businesses in other industries, those started by North Carolinian’s and staffed by North Carolinian’s, be subject to higher tax rates while other companies from out of state receive preferential treatment?
Further, if these large businesses create so many jobs, why not provide an incentive for wealthy individuals to move to North Carolina by lowering their tax liability relative to the lower classes? These wealthy people would purchase more goods in the state, eat out more, etc and stimulate the economy. They may even invest and start a business of their own in this state? However, something tells me that you support the wealthy paying their “fair share” of income tax.
Perhaps the elimination of the corporate income tax, which is really only a sham because we all know that consumers pay all taxes, would provide the necessary incentives for businesses to move into this state and provide for equitable tax treatment.
Thank you for your comment.
I absolutely believe in equitable tax treatment for all industries – not just film. I think it would be wise to incent many other type of industries that bring high paying jobs to the state. I’m pro-business incentives as long as NC comes out ahead. I truly believe that NC business owners should also reap a benefit from starting a company – and maintaining a business here. We’ve lost many industries – including furniture and textile to other countries which may not have happened if we incented them to stay. If someone would try to get a bill started to incent them to come back into the state – I’d be ALL for it.
Incentives for wealthy individuals – no. That’s entirely different in my point of view. With companies, you can be sure they will be spending millions here – most importantly creating local jobs – and they have to quantify these expenditures. It would be a tough to quantify how much money a wealthy individual would actually spend in NC – much less how they would be creating jobs – unless of course you audit their expenses annually – like the Dept. of Commerce audits the film production companies and other businesses that benefit from incentives. Yes, – I think the wealthy need to pay their fair share of taxes. Absolutely. If this wealthy individual wants to start a business in NC – provide an incentive or benefit – absolutely. ALSO – if you incent the businesses – the wealthy individuals that head up these businesses will more than likely move to NC anyway.
Thank you Mr. Sutton for allowing my opinion. I appreciate your opinions and input. Working (or at least trying to) in the film industry in NC has made me very sensitive to attacks specifically against film incentives. Incentives of any kind- in this economic climate especially – are a necessity – unless for some reason every state, country, etc. all of a sudden decided against continuing to offer them – then we can let NC stand on its own merit to recruit business and jobs. (I personally think NC IS the best place to live and work. Unfortunately the people making decisions about where to bring their dollars, don’t know it..yet.)
Mr. Davis,
If casting a wider net with regards to incentives is a good idea, might I suggest casting the widest net possible by easing the tax and regulatory burden to the extent that incentives are unnecessary. Capital flows where it is welcome and the notion of incentives is simply an admission that capital is not welcome in North Carolina unless, through preferential tax treatment, capital investment is purchased by politicians.
An across the board easing of the tax and regulatory burden would attract industries in which North Carolina has a comparative advantage and thus industries which are more sustainable in our state. The route we have taken in North Carolina allows politicians to choose which investments are best for North Carolina instead of investors deciding to come here based on our advantages such as a well educated work force, infrastructure, temperate climate, etc.
If offering tax incentives is good for NC, then lower the burden across the board. It is morally wrong to confiscate someone else’s hard earned money and redistribute it to others.