LIVE: The constitutional issues of Special Counsel investigation of Russia, Trump and campaign

Thursday, 07 April 2016 15:48
Nungesser's Louisiana film industry tax credit idea could strike green oil
Written by 
Rate this item
(1 Vote)

Is Lt. Gov. Billy Nungesser on to a good idea concerning the Motion Picture Investor Tax Credit that can both keep the film industry shooting prodigiously in Louisiana and as a result not have the state lose money hand over fist?

ungesser, whose portfolio includes culture and tourism although the state’s Department of Economic Development oversees the credit, proposed to a reporter a profit-sharing arrangement for Louisiana not unlike that enjoyed by participants in movie productions. Typically, parties involved negotiate for a share of the net profits of a production. Nungesser suggests for blockbusters that the state get a cut of that action, liking it to oil wells where one strike can pay for lots of dry holes.

That could offset the huge taxpayer losses suffered on the program, which returns less than a quarter of every dollar spent to the state. At the same time, it could present a way to reverse the recent pullback of productions in Louisiana, as a consequence of reforms to the credit that eliminated its virtual open-ended status.

But it wouldn’t work much at all from taxpayers’ perspectives if any putative statute on this account used net profit as a standard. Hollywood uses creative financial arrangements and accounting procedures to minimize the apparent “profit” on any given film. Typically, a studio creates a shell corporation or other legal arrangement for every film and then it levies fees on the entity, using percentages often derived through guesswork if at all related to reality. Thus, if profit sharing occurs within the shell, the studio can find ways to suck out all the profits; under these rules, legions of high-grossing films technically never have turned a “profit” and therefore have not paid out on any points to writers, actors, and others involved with these huge hits despite contractual obligations.

Therein lies the key for this to work for Louisiana’s taxpayers: any such law must take a cut of the gross profits or revenues of a film, which usually only big names in the industry can secure. Apparently the recent legal change to put a $180 million cap on redemptions of credits has spooked the industry the most; the state could remove that early (it will sunset for fiscal year 2019) in exchange for something like taking ten points of worldwide gross profits when these hit $100 million (payable annually) and above for any film that has credits certified for it.

Using 2015 releases as an example, the state would have recouped around $263.8 million with such an arrangement – slightly more than the actual amount of credits paid out, although much of those came from previous years, and would have put the state about $70 million to the good in tax impact. The cutoff almost ensures that a film does not have to pay up unless its gross profits exceed its production costs, as almost always only efforts that gross at least a few hundred million bucks have production costs exceeding nine figures.

The state taking a cut only when a huge fatted calf wanders by would not ensure a warmer reception by producers. Nungesser perhaps did not know how accurately he summed up the industry by comparing it to wildcatting: studios often make money-losers but continue in operation by living off the few mega-hits, so anything eating into those big winners would discourage their coming to Louisiana to take advantage of the credits.

Still, this plan presents an alternative to the only rational course of action if policy-makers want to bring more benefits than costs to the state on this issue – winding down the credits, perhaps retaining them only for small, indigenous projects. If policy-makers blinded by the bright lights of Hollywood and/or cowed by the relatively small group of people who have benefitted enormously from the present program rules want to retain the program at this level in a way that actually helps the state, then they should pursue this course of action.

Jeffrey Sadow

Jeffrey Sadow is an associate professor of political science at Louisiana State University in Shreveport.   He writes a daily conservative blog called Between The Lines

Login to post comments
  • Cat Fights on the Hot Cement Confederate New Orleans statues
  • Ex-Saints, Bears, Bills, NFL Exec, Jim W. Miller discusses NFL Draft tomorrow
  • Trump's new plan; Curtains on tax returns release; 40% say Trump-Russia; Probing Obama admin
  • Watch Louisiana Governor Edwards talk about CAT Tax failure

catRarely, have I seen few issues that have generated as much raw heat, tension, and passion than the Confederate monuments controversy. 

Just as existed during the real civil war, where brothers battled brothers, social media is the battleground, particularly Facebook, pitting friend against friend.

On one side of the tense divide, there are those who are protecting the New Orleans civil war era monuments.  Burnt in effigy, forever, is the symbol of Mayor Mitch Landrieu for up-ending what the monument protectors consider to be the loving civil society of New Orleans.

Lately, events have turned somewhat militaristic.

Some protectors of the Confederate monuments have been staying vigilant, in person and online, even surveilling during the wee hours of the morning, waiting for the next Mayor Landrieu attack. On Sunday morning, with protections of snipers, masked workers and a dumbstruck audience, the worst of all of the monuments was cut and carried., the Liberty Monument. 

Read More

miller nfl live2 5It’s D-Day or Draft Day tomorrow in the NFL.

More specifically, Thursday represents the first day of the NFL draft 2017.

Read More


trump curtainsThe major President Trump news of the day focuses upon taxes, not only the tax cuts he is proposing but his own taxes, which he obviously, refuses to unveil.


Read More

edwards play money 1

At a press conference today, Louisiana Governor John Bel Edwards said the CAT Tax did not pass the House Ways and Means Committee.  The Governor, in addressing the media said that "the fate of that bill was decided long before we unveiled it".

Read More

BB Menu


Sen. Appel talks budget, economy


Dead Pelican

Optimized-DeadPelican2 1 1