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Can You Spare A Dime

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By Lowell L. Kalapa

Would you like it if state government offered to pay 15% to 20% of your household bills or perhaps 15% or 20% of the costs of operating your business?

Well, that is what one bill moving through the legislature would do. The measure would provide a tax credit equal to 15% of the costs incurred in a county with a population of over 700,000, or 20% of the costs incurred in a county with a population of 700,000 or less, for a qualified production of a motion picture or television production. The idea is being proposed because proponents point out that other states are offering such incentives in order to attract movie and television productions to their states. They go on to argue that if Hawaii doesn’t hand out incentives, it will lose these job-creating ventures to other states. After all, they point out, movie and television productions create jobs for Hawaii’s people.

Hawaii currently offers such productions a credit equal to 4% of the production costs incurred in the state and a 7.25% credit for any hotel accommodations purchased by the television and movie production. These credits basically offset the “sales tax” and the transient accommodations tax that the production company pays on the purchase of goods and services and hotel accommodations in the state. In that respect, there is a justifiable basis for extending the current credits in order to level the playing field for these production companies that might shoot their productions in another state.

The current proposal would basically underwrite the costs of the movie or television productions to the tune of 15% or 20% depending on whether the production is done on Oahu or on the Neighbor Islands. Such a subsidy might be justifiable if, in fact, the production was producing a public good such as health care or housing. But in this case the argument is that it is creating jobs. But job creation can come from all sectors of the economy. Why didn’t the legislature subsidize the pineapple or sugar industries when they suffered sever competition from sugar growers from around the world? Not subsidizing the industry meant the closure of plantations and the loss of thousands of jobs.

Advocates seem to overlook the one thing that no other destination can offer, and that is Hawaii’s unique beauty and the fact that weather wise, productions can film nearly 365 days a year. Not only that, but Hawaii can offer sun and surf and the wintry climates of Haleakala and Mauna Kea.

While the advocates try to make an argument that Hawaii needs to enact such an incentive to compete for this type of business, one has to ask “at what price?” Promoters of the film industry obviously don’t give much credit to Hawaii’s natural beauty and more recently its relative security. One has to ask the actors of the hit series “Lost” who have bought homes here if they would like to work elsewhere. That production has been successful without any state subsidy.

While film producers may moan that they will lose money without the proposed tax credits, is there any offer to share the wealth when a film makes millions of dollars? If promoters of the film industry would just do their job in outlining the advantages of doing this type of work in Hawaii and address some of the costly barriers by correcting them, such tax incentives would not be necessary. From permitting to skilled labor to facilitating transportation of equipment, there are ways to reduce the cost of filming in Hawaii. Unless these intrinsic elements are addressed, moviemakers will probably demand subsidies such as this incentive.

As one observer put it, these tax credits will do nothing more than put the down payment on some movie producer’s new swimming pool in Beverly Hills. Meanwhile the average Hawaii taxpayer continues to struggle to pay taxes, groceries, and for a roof overhead.

It is also apparent that movie producers do not undertake such projects to lose money and therefore justify these subsidies. When they do sell their movies for a profit, is there any provision in the proposal to have them return some of the up-front subsidy or do they just laugh all the way to the bank? If the advocates of this proposal want the state, more importantly taxpayers, to invest in these ventures, then taxpayers – the state – should expect a return on that investment.

Finally, the measure does not specify that these movie and television productions have to be undertaken by out-of-state people, but it applies to anyone making productions, so the credit could be claimed by someone who is already located in the state, thereby discriminating against other not-so-favored businesses in the state.  

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