Good, innovative theater in small local venues is a true cultural asset, just the kind of cutting-edge stuff you’d think Massachusetts would encourage and just the kind, you’d think, that the Legislature’s proposed theatrical tax credit would boost.
You’d think wrong, however. The tax credit only applied to theaters with 600 seats or more, leaving most of the locals out of luck.
That, in truth, is only a minor flaw in what was a bone-headed scheme that favored the rich versus the poor, the big versus the small, and the unimaginative versus the innovative. Billed as a promotion for the arts, it was really about jobs — and it would have been bad at that, too, an inefficient and ultimately self-defeating way to lift the state’s economy.
Luckily for the Commonwealth, Governor Deval Patrick vetoed this piece of foolishness Thursday. But still — what were the legislators thinking? As written, the law gave theatrical companies a tax credit of 25 percent on pretty much any of their expenses. Capped on $3 million per production (and $10 million a year statewide), it was a pretty rich incentive, much like the state’s film tax credit. And as just as the film credit was supposed to be an incentive to boost local film-makers, so the theater credit should be designed to support local theater.
But as the minimum seat requirement illustrates, that’s hardly the case. Only big theaters would benefit — most of them to be found in what we call Boston’s Theater District —
The upshot: State money — your money — was to be spent to help big and commercial theaters produce stuff that’s big and commercial. This wasn’t about art; it was about commerce.
It’s an old game as well: The 50 states have long competed against one another, trying to lure businesses into their borders by offering bribes. Bribes, in this case, mean some kind of benefit: special tax breaks, cheap loans, even direct investments. Rhode Island, you may remember, did that with Curt Schilling’s 38 Studios. Didn’t turn out so well.
And why a tax break for theater? Well, New York and Illinois do it. So does next door Rhode Island. (You’d think they’d have learned.) The bribes by states to get new businesses don’t do anything for the national economy; all that’s happening is businesses are moving from place to place. But sometimes it works for individual states. The Massachusetts Department of Revenue, for example, reported in 2013 that $44 million in film tax credits generated 497 net new jobs. That’s seems good until you realize it works out to $88,000 a job. One wonders: Why not just fund the unemployed directly?
Oh yeah. Because then we wouldn’t get to see Tom Cruise.
Celebrity aside, other Massachusetts businesses — biotech, health care, and computer software — must have wondered why they aren’t getting a 25 percent tax credit. Don’t they too create jobs? Doesn’t the state want them?
In fact, some do get tax breaks. The others must need better lobbyists.
The New York Times recently counted up a total of 1,874 different kinds of bribes offered by the states, totaling $80.4 billion. Impartial analysts, such as the Tax Foundation, say these aren’t worth it. It’s not only that the economic boost generated by the breaks is no great shakes. It’s also an opportunity cost: The money could likely be better spent elsewhere.
Businesses like stable and fair tax policies. A tax break for one industry is unfair to everyone else, making for an uneven playing field. It would be far better for local economies if states took the money they spend on various incentives and used them, say, to reduce taxes across the board, improve their infrastructure, or better educate their workforce.
All of this is well-known, and most legislators and policy makers understand it to be true. But if Rhode Island and other states are doing it, then, runs the logic, we have no choice but to do it as well. It’s kind of like a tax arms race, with every state trying to one-up each other, all foolishly and madly headed downhill. Kudos to Patrick for putting a stop to it.