Analysis: Pa. would lose film work without tax credit

HARRISBURG - If Pennsylvania ended its tax incentive for film companies, some crews would pack up and find locations outside the state to shoot, a report released yesterday found.

Pennsylvania "could expect to lose significant amounts of production activity statewide without such an incentive," according to the report by the General Assembly's Legislative Budget and Finance Committee.

"In the current economics of the industry and the highly competitive landscape at state levels, the presence of a film tax credit for producers can be considered the price of admission for being considered for such activity," the report said, noting that only eight states don't offer such credits.

Under the two-year-old program, which is capped at $75 million annually, film companies can receive a tax credit of up to 25 percent of their Pennsylvania production costs. Twentieth Century Fox, for example, received $12 million in credits for M. Night Shyamalan's The Happening.

The film industry - from TV shows to feature films to commercials - employed 3,950 people across the state, paying wages of nearly $147 million, in fiscal 2007-08, the study found.

Sen. John Pippy (R., Allegheny) a supporter of the tax credit and head of the committee, said figures like those bolstered the need to keep the credits.

"You can now make a very strong argument that the credits have had a positive impact," Pippy said.

But the study has not silenced critics of the credit. Sen. Patricia Vance (R., Cumberland) said she was more determined now than ever to stop the incentives.

She pointed to a finding in the study that showed Pennsylvania received just $18 million in new tax revenue from the $58 million it spent in tax credits in fiscal 2007-08.

"This is a net fiscal loss to the commonwealth, and we can't afford to continue it right now," said Vance, who has introduced a bill to stop the credits for two years. "The people that I am talking to are more concerned about their financial future and paying more in taxes than they are about giving $75 million yearly to the film industry."

When factoring in revenue generated by the entire film industry in 2007-08, the state realized a slight net fiscal gain of $4.5 million, the report found.

Vance is among a group of legislators in both chambers, mostly Republicans from the central part of the state, who have complained that the tax credit is a giveaway to wealthy Hollywood executives and that it doesn't produce the type of economic spinoff that many contend it does.

The analysis was conducted by Economics Research Associates of Chicago at a cost to taxpayers of $68,000. The legislative committee postponed discussion of it until June 17.