Kubacki: Tax credit boosts economy; cost to state $0

For the past six months, the Chicago Sun-Times’ Tim Novak and Chris Fusco have taken potshots at the Chicago film industry in their “Watchdogs” articles. 

The most recent story blared the cringingly misleading and erroneous headline: “Hollywood’s gift from Illinois taxpayers – $200 million in film tax credit.”

The “gift” implication was that the state was giving money away and wasn’t getting anything in return from Hollywood’s investment in Chicago film production.  

“Nothing could be further from the truth,” objected Wayne Kubacki in an opinion piece the Sun-Times published Sunday and is reprinted below.

The statistics Kubacki provided clearly and decisively show that film incentives cost taxpayers nothing – while revenue from incentivized productions brought billions of new dollars directly and indirectly to the state economy!

KUBACKI WRITES IN THE SUN-TIMES:  It’s been reported recently that, from July 2008 to December 2014, $2.8 billion was spent here by TV series, movies and TV commercial productions on wages to Illinois residents, and goods & services provided by Illinois businesses.

As a result, $204 million in tax credits were awarded under the Illinois Film Production Services Tax Credit Program.

So far, so good, but the tax credits were described as a “gift to Hollywood,” and the statement made that the taxpayers of Illinois stand to lose the $204 million. Nothing could be further from the truth.

It’s absolutely valid that every business incentive should be judged on the basis of its cost vs. benefit. In this case, that means determining the amount of state tax revenues generated by $2.8 billion in film production expenditures, and comparing it to $204 million in state tax credits that have been awarded.

The Screen Actors Guild commissioned exactly that type of study in Chicago in 1997 and although that’s a long time ago, the types of expenditures and ratio of wages to non-wage expenditures haven’t changed. So it’s still valid to use it as a basis to arrive at a close ballpark estimate of how much of the $204 million in tax credits Illinois has already recouped.

$Billions generated by film production*

The result is astounding – $2.8 billion, coupled with $4.7 billion in indirect economic activity generated by it, produced a whopping $438 million in state, county and city taxes. The SAG study broke out city tax revenues (its intended use was to demonstrate how much the industry puts in Chicago’s tax coffers), but state and county tax revenues were combined.

Using the same approach, the city’s share is $145 million, and the combined state and county portion is $293 million. County taxes are a relative sliver compared to the state, but for the sake of a ballpark, let’s round off the state’s share to an even $250 million.

So, $204 million in Illinois tax credits have resulted in $250 million in Illinois tax revenues … didn’t cost the taxpayers a penny, or were a bad deal for Illinois …. and they added to the state’s tax coffers rather than depleting them.

Many economic benefits created by production

The Illinois film tax credit program has put thousands of Illinois residents to work and pumped billions into our local economy. It’s benefitted existing support companies, while at the same time motivating out-of-state companies to open here and strengthen our infrastructure.

It’s done this without resorting to the huge costs some states have incurred by making eligible the salaries of non-residents (including millions paid to stars and directors) and in fact, it’s been revenue positive, not negative.

It’s encouraged diversity in our workforce, and has had the added benefit of boosting tourism – which is tough to measure, but still true.

I believe that perfectly fits the definition of a “win-win” situation.

A community leader, Kubacki is a founding board member of the Illinois Production Alliance and partner in Essanay Studio & Lighting. Wayne@essanay.com.

*Bold subheads and emphasis, paragraphing ReelChicago’s.