As lawmakers in Raleigh consider how to approach the mammoth task of tax modernization, business incentives are poised to be at the center of heated debates.
Already, state legislators from the Cape Fear region are working to frame film incentives as a critical factor for the state’s economy. Like many of his Republican colleagues, State Senator Thom Goolsby is not a fan of incentives, but the coastal coalition is drawing an important distinction between tax credits for the movie business and incentives for other industries.
Rachel Lewis Hilburn: “Both the county and the city agreed to give about half a million dollars in incentives to Castle Branch, a local company. And I’ve heard one of your colleagues, [Representative] Rick Catlin say that’s tantamount to corporate blackmail. Where do you stand on incentives?”
Senator Thom Goolsby: “Overall, if I tell you what I think about incentives, I would tell you that I absolutely despise them. I hate taking the peoples’ money and have to go out and use it to bring businesses into an area.”
In fact, Senator Goolsby says he wishes the issue would be taken up at the federal level.
“I mean it really is awful what we’ve seen happen. I wish the U.S. Congress would act and say you know what? We’re going to stop this as a matter of just national importance. We’re not going to allow anybody to bribe people to go from one state to the other where you’re just taking valuable resources that could go to Medicaid – that could go to schools – could go anywhere. And you’re bribing other businesses to leave one state to go to another.”
Goolsby calls it economically vacuous to offer incentives. He says it shows very poor judgment. But...
“As bad as incentives are – if we don’t put the money into film, it’ll go away.”
So Goolsby and his colleagues from the coast are faced with what could be an uphill battle -- convincing other state senators and representatives that film incentives are different because the refund check is delivered after the production wraps.
“It is not ‘Hey, Dell Computer, if you come here we’ll give you no taxes for this amount of time. We’ll give you this money up front. We’ll do this, do that,’” says Goolsby. “They may come. They may stay the whole time. They may go. The minute the incentives go, they may leave. And leave you holding the bag with an empty warehouse.”
Film incentives don’t require an up-front outlay. And that means, argues Goolsby, they don’t carry the same risk as traditional business incentives.
“You come in, you do what you promised to do or you don’t do it. And at the end of it, you come and you open your books up, and our Department of Revenue looks at them and says, ‘This is how much money you’ve spent. This is what the film incentive is. Here’s the check.’”
Some legislators in other parts of the state view keeping the film business in North Carolina as a coastal issue. So Goolsby is making the case that the whole state has skin in the game.
“A large majority of that money does come into eastern North Carolina, particularly New Hanover County, the biggest chunk of it comes here, says Goolsby. “That’s one reason that I am - - and our whole legislative team – you know – Rick and Ted and Susi – and Frank Iler across the river and Bill Rabon and Chris Millis. I mean we’re all tuned to that and we understand it and we understand what it means...I hope my biggest ally’s going to be Bob Rucho. He’s the one we need the most ‘cause he’s the one that’s dealing with the whole tax reform issue. That is his bailiwick.
Goolsby continued, “But you know overall incentives don’t make any sense for the state, for communities. But we don’t have a choice. I mean if we don’t do it, we don’t get it.”
Several other states are exploring expanded film incentive packages – including South Carolina, Arizona, Connecticut, and New Mexico. Since Michigan Governor Rick Snyder dramatically cut incentives in his state, the industry has seen a significant drop-off in activity.