A lawmaker this week proposed reforming Pennsylvania’s $100 million film-production tax-credit program, a policy he said he believes doesn’t benefit enough independent, non-urban projects.
State Senator David Argall (R-Mahanoy City) sent a memorandum to colleagues in which he ascribed $5 billion in recent economic activity to the program. He said that the subsidy is falling overwhelmingly into the hands of filmmakers basing their projects in and around Philadelphia and Pittsburgh.
In the last decade, he wrote, Philadelphia and its suburbs got nearly two-thirds of the credits while Allegheny County-based productions received one-fifth. Those allocations add up to about $580 million over that period.
“I’ve been approached by some small independent producers who would like to utilize these tax credits in rural Pennsylvania and so it’s both a geographic issue as well as, I think, an issue between the big guys and the little guys,” Argall told The Pennsylvania Daily Star. “And so all I’m suggesting is that we try to allocate these tax credits in such a way that we are boosting both the rural, suburban and the urban areas as well as the major producers and the smaller independents.”
Argall’s legislation would reform the program to allot 10 percent of all annual credits awarded to productions with operating budgets totaling under $1 million. The bill would also reserve 20 percent of the credits for projects recorded primarily outside Philadelphia, the four counties comprising its suburbs and Allegheny County. The measure would allow expensing of the tax credits only in Pennsylvania.
Argall recalled being in the fifth grade when Paramount Pictures came to his home county of Schuylkill to film its 1970 production The Molly Maguires, a memory that he said underscored for him the importance of attracting film projects to the Keystone State.
“It was a very big deal here,” he said of the film starring Sean Connery and Richard Harris. “It was a nice shot in the arm for the local economy in the Hazleton and the Jim Thorpe areas and I think more communities would like to have a piece of that pie.”
Filmmaker tax incentives have nonetheless been controversial. Sixteen states do not offer them. Some states, including Michigan, Florida, and Indiana, used to do so but allowed those programs to expire. According to a 2019 report by Pennsylvania’s nonpartisan Independent Fiscal Office, film and television employment continued to expand in these three states.
That same report found Pennsylvania experienced mixed results in the first decade of implementing its tax credit, seeing a 10.2-percent movie and TV show job expansion in the first five years but a 3.6-percent decline in the next five. In 2017, the commonwealth ranked ninth among states for film-industry employment but still fell below Texas and Florida, which do not award film tax credits.
Argall said he attributed at least some of those two states’ success with filmmaking to natural advantage, specifically climate. He added that he fears the commonwealth would lose its competitiveness as a film destination if it dropped its subsidy.
“I think it’s been a successful program,” he said. “I understand the critics, but as long as other states are doing this and other nations are doing this, I really don’t think Pennsylvania has a choice. If we want a piece of this business, we need to compete.”
One of those critics, Tax Foundation senior policy analyst Timothy Vermeer, said those evaluating film and television production tax incentives should weigh the costs to other economic actors who effectively pay to give an industry special tax relief.
“I think that when legislators or Pennsylvania residents are considering the merits of these credits, they need to ask the question, ‘Compared to what?’” Vermeer said. “Why is the film industry getting this credit? Are they more productive than other industries? Are the people who are employed in the film industry more deserving than the people who are employed in the oil and gas industry? I mean, you can go on and on.”
Vermeer also said analyses that purport to show economic benefits resulting from film tax credits too often assume that the commercial activity attributable to movie and TV projects wouldn’t have occurred if the credits were not given.
Policymakers in some other states are considering cutting or eliminating such programs. In February, several legislators introduced a bill to nix their tax credits. Also this winter, the nonprofit Empire Center issued a report arguing that New York should do so as well.
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Bradley Vasoli is managing editor of The Pennsylvania Daily Star. Follow Brad on Twitter at @BVasoli. Email tips to [email protected].
Photo “David Argall” by David Argall. Background Photo “Cameraman” by Vlad Vasnetsov.
