Recently, we read in disbelief the (June 12) Albuquerque Journal headline, “Abortion politics help fuel NM film boom.” The headline is flat-out wrong about the reason behind Hollywood’s presence in our state.
The film business is just like any corporate enterprise. While studio executives and film stars may support our state’s social policies, ultimately everything revolves around the bottom line. Hollywood is here because we’re paying them to be here.
Earlier this year, Democrat leaders pushed through a new law, Senate Bill 2, which dramatically expands the financial subsidies New Mexico’s taxpayers provide to movie and television production companies. These subsidies, misleadingly called the New Mexico Film Tax Credit, are nothing more than a government giveaway.
The incentive has nothing to do with taxes paid by media production companies. In truth, it is a refund for salaries and other film-related expenses these companies incur in our state. When the program was first created in 2002, it was promoted as a modest effort to encourage television and film activity in New Mexico. Under the initial plan, production companies could be reimbursed for 15 percent of their expenditures made within the state. The program was projected to cost the state only $3.2 million per year.
Unfortunately, the incentive has been modified beyond recognition. It’s now one of the most bloated subsidy programs offered to Hollywood anywhere in the United States.
Under Senate Bill 2, production companies can be refunded for as much as 35 percent of their qualified expenditures. The annual cap on reimbursements to the industry more than doubled from $50 million to $110 million. The bill also provided an additional $195 million over the next two years to help pay off a massive backlog of claims filed by opportunistic studios and entertainment companies.
According to the Legislative Finance Committee’s analysis of Senate Bill 2, New Mexico’s taxpayers are now on the hook for at least $750 million over the next five years to subsidize the creation of movies and television programs in New Mexico.
In essence, every household in New Mexico will be paying Hollywood studios almost $1,000 over the next five years for the privilege of hosting their productions in our state.
Senate Bill 2 went even further in exempting film reimbursement payments from the annual $110 million cap if a production company purchased or signed a 10-year lease for a qualified production facility. Two companies, Netflix and NBCUniversal, have already reached 10-year agreements. This means that these two highly profitable entertainment corporations are now eligible for unlimited financial support from us, New Mexico’s taxpayers.
New Mexico – one of the poorest states in the nation – will likely be giving away $1 billion in subsidies to the film industry over the next five years. Seeing New Mexico on the screen is exciting. But imagine the problems that $1 billion could be applied to solving in our state.
For $1 billion, we could meaningfully expand behavioral health services and early childhood care without tapping the permanent fund. We could boost CYFD services to reduce child abuse and neglect. We could fix our roads or eliminate the tax on Social Security benefits. Instead, we’re giving it away to some of the wealthiest companies in the country.
Economic analysis has shown that New Mexico only receives about 40 cents back in taxes for every dollar provided in taxpayers’ subsidies, for a net loss of 60 cents on the dollar. These studies have also shown that each new job created by the film industry costs the state nearly $39,000 in corporate handouts. Does this make good financial sense to you?
New Mexico needs economic development throughout the state, but giving hundreds of millions of dollars to some of the most profitable companies in the nation is no way to bring needed prosperity to our state.
Studio executives aren’t moving their productions to New Mexico because they agree with our politics. They’re here because the state is throwing money at them. Once they’ve drained our resources, they’ll move on to the next state. New Mexico may get its 15 minutes of Hollywood fame, but it will come at an enormous cost to New Mexico’s taxpayers.
