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How one state cheats its taxpayers to award the wealthy

• Capitol Media Services

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Comment by Brock Lorber
Entered on:
Beep, beep, back the truck up.

Here**Q**s the actual report: Motion Picture Production Tax Incentive 2008 Annual Report

1) 6 productions were post-qualified for tax credits.
2) Those 6 productions spent $44.9 million in AZ from CY06-CY08. (38% of total prod. costs)
3) The 6 productions reported $831,067 in sales/use tax exemptions.

The remaining $7.81 million from the article are income tax credits, generated by qualifying expenditures in Arizona. They may only be used to offset income tax liability.

Using the IMPLAN software, the Dept. of Commerce estimates total tax liabilities (direct, indirect, and induced) from both businesses and personal of $2,317,566. The maximum amount that could be offset, then, is $2,317,566.

However, these credits are unique in that they may be sold or transferred. As I read the code, there is no qualification for the transferee (the credits could be sold to a business or individual not in movie production), however, the transfer would generate a taxable event. If all $5.5 million were transferred ($7.8M - $2.3M) the tax liability (6.968%) would be $382,749, a number not included in the Commerce Dept.**Q**s report.

Still, though, the credits can only be used to offset an existing tax liability. The report does not treat these liabilities on parity with the IMPLAN estimate. If they were treated with parity, the total **QQ**cost**QQ** to the general fund is either the full amount of credits used (up to $7.81 million) or it is $0. I leave it to you to decide whether unrealized revenues are **QQ**costs**QQ**.

If only it were that easy. The **QQ**costs**QQ** identified in the Annual Report don**Q**t contain any actual costs. That is, costs of administrating the program were intentionally omitted from the report (see footnote to Figure 17).

It may come as a surprise to AZ taxpayers, who actually bear these true costs, that Arizona has 10 local film offices/commissions. Five of these offices could not even be bothered to contribute data to this report **QQ**due to staffing issues**QQ**.

You know who probably has real **QQ**staffing issues**QQ** when it comes to reporting income and activity to the state? Individual taxpayers. Try using that excuse.


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