Film Office scandal puts spotlight on tax credit

By Mike Owen

It's the feel-good movie of the fall: “Film-Flam: The Discrediting of a Tax Credit.”

Film producers use state money to buy fancy cars, sparking an investigation and political firestorm. Taxpayers respond by demanding a crackdown on corporate tax giveaways. Main Street businesses pull their support from lobbying groups backing their bigger, out-of-state competitors. The state of Iowa gets up off the casting couch and the Legislature passes landmark legislation requiring annual reporting and an annual review of every tax credit and state subsidy to businesses. Millions of dollars are saved! The people cheer!

Aw, Hollywood would never go for it.

But there are good signals that “Hawkeyewood” just might.

Developments regarding the Iowa Film Office and the state's “half-priced filmmaking” promotion expose more than a few anecdotal examples of abuse.

The public policy issues raised by the brushfire at the Iowa Department of Economic Development are much larger. Our concern should be about the credit itself, not only poor management of it, and better accountability for all Iowa tax credits. Iowa gives away many other generous subsidies to industry with little accounting for public benefits in Iowa.

Leading Iowa newspapers, including The Gazette, are pushing for a full review of these tax breaks, and Gov. Culver is doing so as well. It's overdue.

Why should anyone be surprised that this film credit would eventually blow up? Our state has earmarked millions of dollars - $50 million - for a program that has grown beyond all expectations.

It's easy for tax giveaways to begin this way and stay on the books. If they are producing economic benefits, show us. If they do, are they enough? Do the jobs claimed return as much as they cost the state? Are these programs sustainable for the state? Are we providing the seeds for an industry that will eventually flourish on its own, or will it survive only to the extent we keep feeding it?

According to the fiscal note for the original tax credit legislation, the cost of this tax credit in fiscal year 2010 - the current budget year - was expected to be $786,000. The latest report from the Department of Revenue projects the cost of this credit to be $77.4 million - almost 100 times the expected cost.

Can we afford it? Already we face huge budget cuts. Even with the credit capped at $50 million for this year, and even if every dime spent were spent on legitimate film production costs in Iowa, this spending for moviemaking should be weighed against other choices, such as education. What would $50 million do in Iowa schools? For starters, it would pay for nearly 1,500 teachers at Iowa's minimum starting teacher pay plus benefits.

Moreover, we know that in the families of Iowa teachers, the money will be spent in Iowa and it will ripple through the economy. But where will an out-of-state film production company spend its profits, and where will its out-of-state employees spend their paychecks?

What is it we keep telling the schools? Fundamentals? Back to Basics?

Is there a lesson for our legislators?

If we don't take this opportunity to learn, we might be watching for a new character, Iowa Jones, and a new movie, “Raiders of the General Fund.”

Mike Owen is communications director for the Iowa Fiscal Partnership (IFP), a joint policy analysis initiative of two nonpartisan, Iowa-based groups, the Iowa Policy Project in Iowa City and the Child & Family Policy Center in Des Moines. IFP reports are at www.iowa

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