Governor Baker has proposed doubling the earned income tax credit (EITC), an essential benefit that provides a boost to the incomes of low-income workers across Massachusetts. While the Governor should be lauded for his commitment to increasing the EITC, he has proposed tying this increase to the elimination of the Massachusetts film tax credit. The film tax credit, which has been in existence since 2006, has helped build a thriving film industry in Massachusetts that provides good jobs to many people. By attempting to link the fates of these two tax credit programs, Governor Baker has created a false choice for the legislature that has little to do with fiscal responsibility, and much more to do with political convenience.
With this proposal, Baker is attempting to strike at our basic sense of fairness. Who could argue that a family with children getting by on less than $52,000 per year deserves a tax credit less than Columbia Pictures? It’s a narrative that, on the surface, is politically-palatable in a time where the problem of income inequality continues to dominate national conversations.
But unfortunately for Baker, the reality is just not as simple. The truth is that the film tax credit has been far from ineffective. It has created thousands of jobs in Massachusetts and has generated hundreds of millions of dollars in economic activity within the state’s borders. While critics often fault the film tax credit for the fact that it generates a lot of new spending that winds up leaving the state, Department of Revenue figures show that the film tax credit has generated millions in new, in-state private spending in industries like transportation, construction, and food service. Like with the earned income tax credit, this money winds up back in the local economy where it is used by workers to pay for everyday goods and services, generating hundreds of millions in new economic activity and personal income.
If the film tax credit is eliminated, it is likely that Hollywood producers and actors will just move on to other states offering similar incentives. Left behind will be our neighbors and family members—the carpenters, costume makers, electricians, caterers, and other small business owners who depend on the film industry to make a living. Many of these people have invested years of blood, sweat, and tears into building businesses within the Massachusetts film industry, but by scrapping the film tax credit now, we would be pulling the rug out from under them at the worst possible time.
With corporate tax credits, deductions, and rebates in Massachusetts totaling more $1.7 billion annually, we have many ways to pay for an EITC increase at our disposal. That Baker has instead decided to pay for that increase by eliminating another tax credit for working class people is disappointing, but hardly surprising. There is no doubt in my mind that increasing the earned income tax credit is badly needed, but there is no need—other than a political one for the Governor—to link the two issues together.
The Joint Committee on Revenue is hearing Governor Baker’s proposal on Tuesday, March 31st at 10:30 am. As the Vice Chairman of this committee, I am looking forward to hearing testimony and working with my colleagues to develop a plan that allows for the film tax credit to be maintained while providing for the expansion of the EITC.
Photo by Chalmers Butterfield, licensed under CC BY 2.5