State Rundown 9/19: Income Tax Debates and Film Tax Credits

A new report from Standard and Poor’s that shows progressive income tax systems are better for state revenue could provide a boost to tax reformers in Massachusetts, according to The Boston Globe. Massachusetts is one of seven states with a flat personal income tax rate, and a bipartisan commission recently found that the state’s overall tax system places a greater burden on lower- and middle-income taxpayers than it does on the wealthy. They’ve recommended that the state adopt a graduated income tax structure — a move that would require a voter-approved constitutional amendment. Similar proposals have been defeated at the polls five times, most recently in 1994. For our take on the S&P report, check out this blog post from our director, Matt Gardner.

Meanwhile, Tennessee voters will soon decide whether to ban their state legislature from ever imposing a state tax on all personal income (Tennessee currently taxes interest and dividend income). The measure is largely superfluous, since there is little chance state lawmakers would ever consider a broader income tax. The last attempt to introduce a tax on personal income, in 2002, resulted in strident protests, including a brick thrown through the governor’s office window. Lawmakers ended up passing a sales tax increase instead, the last time any general tax increase was passed in the state. In last year’s Who Pays report, Tennessee ranked in the bottom ten states for tax fairness.

The Louisiana Film Entertainment Association (LFEA) commissioned a study on the economic impact of the state’s film tax credit incentive program. They’ve tapped HR&A Advisors, a consulting firm that has done similar analysis of film tax credits for the Motion Picture Association in Massachusetts and New York. The results of the state’s own studies, commissioned by Louisiana Economic Development, show that film credits were a net loss to the state in 2012, and each dollar collected on film credits cost $4.35 in state revenue. In 2010, the state spent $7.29 for each dollar collected. The LFEA study is sure to come up with much rosier numbers.

California Governor Jerry Brown recently signed a bill that would triple funding for the state’s film and television tax credit program. The measure is meant to keep film and television production from leaving the state, and is the culmination of a yearlong campaign by entertainment industry lobbyists. Hollywood has been hammered by aggressive competition from other localities – like New York, Vancouver and Atlanta, where incentives were more generous – and new business models, like Netflix and HBOGo. While the measure enjoys broad support, not everyone is happy about the tax credits: the state’s public education unions fear the measure will reduce the money available for schools, while others have questioned the effectiveness and transparency of the credits.