Your Tax Dollars at Work

Member Group : Commonwealth Foundation

Governor Rendell proposed a $66 billion total state operating budget for 2010-11 that increases taxes. What will these new taxes go to pay? Here is the second in a series looking at Your Tax Dollars at Work.

M. Night Shyamalan’s latest film production, The Last Airbender, was recently awarded over $35 million in film tax credits from Pennsylvania over two years.

The award is the largest in the history of Pennsylvania’s Film Tax Credit (FTC), breaking the record held by his previous project, The Happening, which received $12 million in tax credits. His film Lady in the Water also received a film production grant. The only good news is that taxpayers are only forced to subsidize these movies, not to watch them.

Forty-four states offer tax incentivizes or grants to filmmakers for in-state production, according to a recent report on film tax credits by the Tax Foundation. Pennsylvania is among the 26 states that offer transferable (or in some states refundable) tax credits to film producers. This means that tax credit awarded is more than the actual state taxes the recipient owes, they can sell the remaining credit to another business.A state-commissioned study of Pennsylvania’s film tax credit – conducted by Hollywood consultants – effectively concluded that the tax credit was responsible for every movie filmed in the state. Yet this ignores evidence that the vast majority of films didn’t even apply for the tax credit or that the film tax credit had not had much of an impact on film production in the state. Data from the Bureau of Labor Statistics show that Pennsylvania employs fewer than 8,000 workers in the category "Motion picture and sound recording industries," representing about 0.2% of the state workforce, and an increase of 800 employees since 2004.

Why don’t film credits "create jobs"? In part, they provide incentives for economic activity that would have occurred anyway. Furthermore, a narrow tax incentive does little to improve the overall economy. Indeed, the tax breaks given to the film industry could instead have been used to lower taxes on all businesses, rewarding entrepreneurship rather than lobbying.


Take time to write a letter to the editor urging the General Assembly and the Governor to adopt a "Taxpayer’s Budget." Some ideas could include:

• Highlight examples of wasteful or inapprorpriate state spending.
• Discuss the merits of higher taxes, like a natural gas severance tax.
• Push for greater transparency in state spending – as 30 other states have already done – like HB 1880 or SB 105.

For letter writing tips, click here.

REMEMBER: The Commonwealth Foundation will crown one Pennsylvania resident the 2010 Grassroots Champion, and award that person $500. For details on how to qualify, click here.

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For more facts on the Pennsylvania state budget and examples of wasteful spending, visit

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