Connecticut’s portfolio of tax credits intended to attract film, digital media, and animation work has produced a $773 million net loss to the state over the past decade or so, according to the latest official estimates.
Despite that, the Department of Economic and Community Development (DECD) wants to keep those incentives in place, the agency says.
In fiscal year 2019, the state issued more than $157 million worth of the largest of the three tax credits — the film, television and digital media credit, bringing the total issued to just under $730 million from 2010 to mid-2019.
Over the decade, that program has lost 64 cents for every $1 worth of credits issued, costing the state more than $585 million, according to DECD’s report.
Meanwhile, the film infrastructure credit has cost the state $95 million over the decade.
There were no animation tax credits issued in 2019, but last year’s DECD report disclosed that $123.1 million worth of credits issued from 2008 to 2018 had produced a loss of nearly $93 million.
DECD argued in its new report that the credits produce benefits that aren’t captured in the agency’s economic analysis.
For example, the analysis does not include film and TV productions’ payroll expenses because many workers associated with a production may not be located in Connecticut. DECD also discounts the number of permanent jobs created as a result of in-state productions, excluding companies such as ESPN and WWE because they already have a Connecticut presence, making it difficult to tell how many of their jobs can be attributed to the tax credit. Other benefits, like investments in production-related educational programs at colleges, are also not counted.
As a result, DECD deems the results of its analysis to be conservative, and recommended that the film, television and digital media and the film infrastructure credits continue. (DECD made no recommendation on the animation tax credit because there were none issued last year, but recommended keeping that credit in its previous annual report).
However, the agency said that the level of tax credits should change in the future, “should negative results persist over the long run.”
Lawmakers reviewed the report at a hearing on Friday, where DECD Commissioner David Lehman was on hand to answer questions.
Asked about the film incentives, Lehman said the administration is proud of the digital media industry that has grown in Connecticut, but conceded that the negative revenue numbers “jump out at you.”
“We need to do a lot more work on this,” Lehman said. “Any incentive, in my mind, is just a transfer of payments from one group of taxpayers to another. Anytime we have that, we need to have a very high conviction that it is the right thing.”
He said DECD will be studying the film incentives further and said the agency may recommend changes in 2021.
While DECD is willing to stick with the film incentives for now, some studies have deemed the tax credits — which exist in many states — to be a waste of taxpayer money.
Last year, an associate professor at the University of Southern California found that the film credits in Connecticut and four other states had produced “mostly no statistically significant effects” on motion-picture employment growth.
Editor’s note: This story has been updated to include DECD’s comments from a Feb. 28 legislative public hearing.
