Category: Legislature

This article appeared in the Roswell Daily-Record on December 15, 2020 and in several other New Mexico newspapers.

New Mexico remains among the most locked down states in the nation when it comes to the CoronaVirus. In October the State’s unemployment rate was among the highest in the nation at 8.1%. This difficult economic news combined with the election of a more “progressive” Legislature in November mean that tax increases (and even spending cuts) are likely in store for the upcoming 2021 legislative session. With New Mexico relying heavily on oil and gas revenues, the State’s economic pain will last beyond the coming year.

A new deal announced by Gov. Lujan Grisham with the well-known streaming service Netflix is being touted as good news for New Mexico’s economy. In announcing the deal the Gov. claimed, “My administration has expanded our state’s competitive film incentives, facilitating higher-wage employment for New Mexicans all across the state.” Under the terms of the deal, Netflix will dramatically-expand their footprint in the State spending $1 billion over the next decade.

Unfortunately, despite all the hype and big-sounding numbers, the Netflix deal is just another example of New Mexico’s economically-ignorant political leadership “buying” jobs and economic activity with taxpayer money. The reality is that New Mexico’s already strapped budgets will be drained even more in the years ahead by this new plan to subsidize Hollywood.

Something that too few in the media do is look closely at the particulars of the deal itself. For example: the State offers a 25% film “tax credit” which is really a rebate of 25% of the costs of production. Netflix is able to boost that rebate by another 5% since they are considered a “qualified” production facility. That means taxpayers will reimburse Netflix for 30% of their spending in NM. According to a new report from the Legislative Finance Committee (LFC) states that film subsidy payouts could increase annual tax credit payouts by $25 million beginning next fiscal year.

Lest there be any doubt that film subsidies actually cost the State and its taxpayers money, a separate 2019 LFC report noted, “Because film tax credit payouts are booked to Corporate Income Tax (CIT), actual CIT receipts are higher than the final amounts distributed to the general fund.” These subsidies take corporate tax dollars right out of the State Treasury and hand them to film companies.

“Tax credits” are just the starting point. Additionally, the State is providing $17 million in LEDA incentives; the City of Albuquerque is providing another $7 million in LEDA, and they will also provide an industrial revenue bond to abate some or all property taxes over a 20-year term for the first $500 million investment to build out the facility.

In total Netflix will receive $300 million + $17 million + $7 million + the IRB tax abatement to eliminate their property taxes.

Finally, even though NM has an annual cap on film tax rebate expenditures, the legislation exempted companies that purchase or sign a 10-year lease for a qualified production facility: this means the cap does not apply to Netflix.

In other words, Netflix is definitely going to grow and appear to create more jobs in New Mexico (which will make a lot of headlines), but it will do so at taxpayer expense. That cost is not just in lost revenue, but in actual spending. Those costs, generated through the tax credit, really a rebate, are borne primarily by State taxpayers. This subsidy is both unfair AND unsustainable.

Governor Michelle Lujan Grisham has now locked us in to paying Netflix outrageous sums of money over the next decade at a time of great uncertainty for New Mexico families and the state’s economic outlook.

Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Due to the COVID19 pandemic, the filming of movies and television shows has ground to a halt in New Mexico and around the country. While aspects of the pandemic are devastating to our economy, the shutdown of film is not one of them. That’s because of the outrageous subsidies the State provides Hollywood filmmakers.

In 2019 the Legislature more than doubled the tax subsidy program from $50 million to $110 million. This subsidy expansion would have a massive, negative impact on the State’s budget, especially now that the economic boom of the past few years ended with COVID.

New Mexico is a poor State. Budget cuts and tax hikes will be on the agenda when the Legislature meets in 2021. So, why should taxpayers subsidize Hollywood which grosses $10 billion annually in the U.S., while yearly global box office revenue for American movies nears $38 billion. Yet its profit margins are fattened by American taxpayers, who provide over $1.4 billion in annual subsidies to filmmakers.

Film subsidies are justified by claims that filmmaking will bring jobs and provide money for the local economy. The prestige of having your state’s locations and scenery featured in a popular film plays a role, too—yet, as with sports franchises, the concrete economic benefits generally prove to be elusive.

Today, New Mexico offers some of the nation’s most generous film subsidies, including a 25% tax credit for movies, a 30% tax credit for TV shows, plus a 5 % rebate for resident crew wages if the filming is shot over at least 10 days at qualified facilities (or 15 days if the budget is over $30 million). But these movie-luring investments are nearly always economic flops.

A 2014 Albuquerque Journal article reported that film production in the state had “provided thousands of jobs and generated $1.5 billion in total economic output [from 2010-2014], but film production activity—both movies and TV shows—generated an estimated 43 cents in tax revenue for every incentive dollar spent by the state between 2010-2014.” So, the state lost more than half its investment in movie-making subsidies.

Jim Wisnewski, one of Albuquerque’s more colorful casting agents, had nothing but praise for the role of film and television subsidies in his state:

We say bring it on, it’s great for New Mexico. Throw that state money at Hollywood—bring ‘em in. When they come, they have to spend money in the state, renting cars and hotels, eating at restaurants, and that’s all revenue for us, isn’t it? In fact, we’re proposing a studio be built on the border between New Mexico and Colorado so that those guys can take the 30% tax rebate from New Mexico and the 20% tax rebate from Colorado. They could get back 50% of their taxes that way.

This may seem humorous, but there is nothing funny about taxpayers footing the bill for films the networks are going to film anyway. With New Mexico again facing budget cuts (after having already made some in the recent special session), taxpayer dollars should not be diverted to rich Hollywood film companies.

For many decades, too many of our government’s policies have taken wealth from taxpayers of modest means and provided a big chunk of it to the rich. The same perverse policies are in place today, and there is every reason to believe that they’ll remain in place for the foreseeable future—unless we act as citizens to demand change.

While today’s politicians—especially those vying for the presidential contest in 2020—are proposing ways that the government should act to reduce income and wealth inequality, we ask, at the least, that the government stop making inequality worse.

This is one area of economic policy that the vast majority of Americans of all political persuasions agree on. Liberal or conservative, socialist-leaning or libertarian, Republican, Democratic, or independent—practically everyone will acknowledge the absurdity of having government take from the poor and the middle class to give to the rich.

Yet that’s exactly what happens, every day, in many ways, large and small. New Mexico taxpayers would be well served if their legislature cut such gifts to the rich from their budgets, starting with these ridiculous film subsidies.

*Phil Harvey and Lisa Conyers are co-authors of “Welfare for the Rich,” a new book that was published on August 4, 2020. For more information, go to www.welfarefortherich.com
and @PostHillPress