Conservative Legislators and Film Tax Credits

Posted: Mar 31, 2011 4:42 PM
A minor scuffle has ruffled feathers across the conservative blogosphere in the last two days, focused around the TLC show "Sarah Palin's Alaska" claiming over $1 million in tax credits for filming in the state of Alaska. When she was Governor, Palin signed the law that made this tax credit possible.

This really blew up when Palin took to Facebook to respond to a Daily Caller story on the subject. Battle lines were drawn. Conservatives took sides.

That's all overblown and dramatic. In the interest of trying to have a debate on the issue at hand, here's a disclaimer: Sarah Palin has been unfairly treated by the mainstream media and is a target of vile hatred from the Left. And the insinuation that But that shouldn't immunize her for advocating bad policy. And that's what this is (or should be) about: policy, not personality.

The latest argument on the policy comes from Dana Loesch at Big Journalism:

[I]t is within every state and city’s right to make themselves more competitive by offering tax incentives to attract business and create a business community. Aren’t we, as conservatives, supporters of the 10th Amendment? You pay for things by increasing your tax base, not by increasing regulations or taxes.


Allowing companies more control over their dollars (by way of reselling credits, et al.) is less government intervention. Demanding more of their dollars is absolutely steering, influencing, regulating, and restricting the free market, and it certainly does promote the value of filming in one state over another.

A few points where Dana is correct: tax credits do allow companies more control over their dollars and decrease the overall tax burden, and this does create interstate competition for better tax policy. However (and this is the subject of a lot of debate in Washington over the budget) repealing tax credits shouldn't be viewed as "raising taxes." And tax credits are often the government's way of interfering in the market and incentivizing some behaviors.

Take another state-based tax credit: the Business Energy Tax Credit in Oregon. It's a way to incentivize corporations in Oregon to use "green energy" and to try to draw businesses to the state to invest in renewable resources.

This is absolutely a way of government intervening in business incentives and distorting the market. It's incentivizing behavior (buy 'cheap' green energy!) that conservatives generally disagree with.

Conservatives should want to repeal tax credits like this, and we shouldn't attack our own for then advocating a tax increase. Tax credits are often the government's way of controlling behavior, because they are carve-outs for special interests.

This is aside from the actual merits of the film tax credit policy. It might be a good thing for all states to give out film tax credits. But I generally don't want to empower legislators to be able to use the tax code to incentivize behavior, be it on the part of businesses or individuals.

I would say it's more important to (especially when your state is running a surplus) lower the tax rate on all corporations, not just those in the film industry. It's important to treat every company in every industry equally with regard to tax policy. One state's film tax credit may be another state's green energy credit.