Time to Say “Cut” on Massachusetts’ Film Tax Credit?

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State Senate President Karen Spilka is taking preliminary steps towards reforming the state’s tax code, assembling a group of policymakers, academics, and other specialists to look for ways to make the Massachusetts tax code more progressive and possibly raise revenue. One place that’s ripe for reform is Massachusetts’s film tax credit program.

What is the Film Tax Credit?

Under current law, film production companies that spend more than $50,000 in Massachusetts are eligible for a sales tax exemption, a payroll tax credit worth 25 percent of its total salary costs, and a 25 percent production expense tax credit. To be eligible for the production tax credit, the company has to either spend at least half its film production budget in-state or spend at least 50 percent of filming days in Massachusetts. The production expenses do not include payroll expenses used to calculate the payroll tax credit.

The film tax credit is refundable, which means that it can go beyond simply reducing the fiilm production company’s tax liability. If the value of the film tax credit calculated using the above formula is greater than the amount of taxes the film production company owes to the state of Massachusetts, the government pays the company the difference between the tax credit owed and the company’s tax liability. In that sense, the film tax credit is better understood as a government subsidy.

As the Massachusetts Budget and Public Policy Center explained in 2015, businesses have three options. They can either carry forward the full value of the credit for up to five years, sell the credit, or cash in the credit immediately to receive 90 percent of its value from the Commonwealth.

How Big is the Film Tax Credit?

According to the state Department of Revenue’s most recent tax expenditure budget, the film tax credit will cost the state $80 million dollars a year in lost revenue in fiscal year 2019.. State government often underestimates the full annual cost of the credit, because the Commonwealth does not release data for pending tax credits awarded to films released in previous years. For example, last December the Department of Revenue (DOR) released a report showing that the state awarded $88.9 million in film tax credits in 2016, as opposed to the roughly $62 million originally reported.

What’s the Argument for the Film Tax Credit?

Supporters of the film tax credit argue that it attracts production companies to the Commonwealth, which means more jobs for residents, and more in-state spending.

Does it Work?

Evidence from Massachusetts and around the country indicates that film tax credits are a very ineffective way to generate economic growth or create jobs.

A 2014 DOR report found that from 2006 to 2012, the Commonwealth offered $411 million in film tax credits, which increased state spending by $261 million. During that time period, the program only created 3,000 jobs for state residents at a net cost of $109,000 per job. Furthermore, jobs created by the program tend to be short-term; most lasted less than three months, some lasting a matter of weeks or days. All told, every dollar spent on the film tax credit created just 14 cents of new revenue.

These data are consistent with the experiences of other states. A Michigan Senate study found that each job created by their film tax credit program lasted an average of 23 days, while a report from Florida found that their program created only 18 cents in tax revenue for every dollar spent. Even more damning was a study from University of Southern California economist Michael Thom that found minimal to no positive, long-term employment or wage benefits from film tax credit programs around the country, and that most of the gains went to people who already worked in the production industry.

Tax subsidies for film production have been criticized as inefficient by both left-leaning and right-leaning think tanks, such as the Center for Budget and Policy Priorities and the Tax Foundation. Some scholars have even argued that targeted state-level incentive programs like the film tax credit actually reduce state economic growth, because of the opportunity cost of these programs. Each dollar spent on subsidizing films is a dollar not spent on reducing tax rates for everyone or strengthening infrastructure or education.

Another question for film tax credit supporters is what percentage of films that received the credit would have filmed in the state anyway. For films like Patriot’s Day, The Departed, the upcoming Little Women film adaptation and even The Social Network, the Boston setting is crucial to the film’s plot.


Massachusetts’s film tax credit program is not an efficient way to attract businesses to the Commonwealth, create lasting employment, or stimulate the economy. As the new working group considers how to reform the state tax code, they should take a critical look at the film tax credit. Amid concerns about funding priorities like public transit or shoring up state pensions, cutting the film credit would be a good way to raise revenue.