How States Compete and Lose
Posted at 11:45 a.m. on Dec. 6, 2012
David Segal laments states’ efforts to “concoct targeted tax breaks which they use to lure corporations from their neighbors,” which reportedly costs states $80 billion per year in lost revenue.
“Most people think it means that there’s a reduction in taxation on expenditures in service of the given project. Far from it, and far worse, here’s how it works: A movie films in State X, and spends $20 million therein. If State X offers a 50% transferable tax credit for film expenditures within its borders, it forks over $10 million thereof. In the case of a state…that isn’t the production company’s home base — the production company will have a accrued negligible state tax liability, so it will sell these credits to an entity that has a more substantial tax burden.”