A study released by the Department of Commerce Tuesday criticizes the state’s current film tax incentive program, citing several fundamental flaws in its design.
The purpose of the study is to clarify public misconceptions of how the program works and also to compare this program with other tax credit programs in the state, according to Deputy Secretary of Commerce Aaron Olver.
“It seems like there is some confusion out there,” Olver said. “I think a lot of folks think that the way the tax credit program works is that films come in and for whatever taxes they generate, the films get 25 percent of those back.”
Olver said the reality is the film tax credit program is actually a refundable tax credit program, meaning if the amount of tax credits earned by a film exceeds the taxes owed, the state has to write a check to the film for the difference.
The film “Public Enemies” generated around $270,000 in revenue for Wisconsin, but because of the refundable tax credits, the state was forced to pay $4 million, Olver said.
Olver added the program has numerous faults which are detrimental to the state’s economic development, such as an inadvertent bias created toward out-of-state labor, benefits which are mostly offset by expenses, a higher cost than other economic development programs and inefficient job creation.
“If you look at what it takes to create one full-time job for one year, it costs about 20 times more to get one full-time film job than it does to get 20 jobs of another type,” Olver said.
Ben Nuckels, spokesperson for Lt. Gov. Barbara Lawton, said the program does have some issues to smooth out but added the study is riddled with incomplete data and assumptions, as the only example mentioned in the report is “Public Enemies.”
Nuckels added “Public Enemies” is only one of 29 creative industry projects that came to Wisconsin. Other projects include eight feature films, 16 television shows, three national commercials and two video games.
According to Nuckels, the DOC also uses numbers based on estimates from Film Wisconsin instead of actual facts.
“Commerce analysis of ‘Public Enemies’ mostly uses estimates and reverse calculation on expenses based on the sales tax instead of doing it the old-fashioned way of accounting for each production line by line,” Nuckels said.
Other benefits omitted from the report include the $86,000 paid out in local and state taxes and the creation of permanent facilities in anticipation of future productions, Nuckels said.
Nuckels added the DOC actually created the non-resident loophole in the program by choosing to count certain workers as production expenses instead of under the salary and wages column, which is capped at $25,000.
“You need look no further than the director of ‘Public Enemies,'” Nuckels said. “If they had counted that salary under salaries and wages instead of production expenditures, they wouldn’t have overpaid $446,416.”
The Legislature’s Joint Finance Committee is currently revising the program.
