February 17, 2010
Florida Sales Tax Holiday, Film Tax Credit Plans Won't Deliver on Promises
Tax Foundation Report Outlines Why Back-to-School Sales Tax Holiday, $75 Million Film Tax Credit Program Are Poor Tax Policy
Two plans in Florida to implement a back-to-school sales tax holiday in August and expand its film tax credit program to $75 million will fail to live up to promises of significant tax relief and economic growth, according to a new Tax Foundation report.
"Sales tax holidays are politically popular and allow lawmakers to claim they're cutting taxes and boosting sales, when in reality, the minimal tax relief is only temporary, and purchases are simply shifted from other times of the year," said Tax Foundation Staff Economist Mark Robyn, who authored the report. "Similarly, film tax credits provide for good photo-ops featuring movie stars and politicians touting job creation, but the programs simply lead to a bidding war among states to see who can offer Hollywood the most generous handouts."
Tax Foundation Fiscal Fact, No. 210, "Florida's Sales Tax Holiday and Film Tax Credit Proposals Will Not Deliver on Exaggerated Promises," is available online at http://www.taxfoundation.org/news/show/25850.html.
The August sales tax holiday plan would exempt clothing, footwear, books and school supplies from the state sales tax. The vast majority of increased purchases during the sales tax holiday period are simply shifted from other weeks and provides no overall economic benefit, according to the report.
"If lawmakers want to provide real, permanent tax relief for Floridians, they should cut the sales tax rate year-round rather than relying on political gimmicks such as sales tax holidays," Robyn said.
The film tax credit proposal would expand the current $10.8 million incentive program to $75 million, a nearly sevenfold increase. As the bidding war continues among states, Florida will be forced again to redouble their efforts to lure film productions.
"This strategy, which amounts to corporate welfare for film producers and movie stars at the expense of the rest of Florida's taxpayers, is simply not a sustainable approach to economic development," Robyn said. "A state's tax code should serve as a 'welcome mat' for all industries instead of providing 'Hollywood treatment' for some."
Robyn also noted that the jobs "created" during film production are usually temporary with limited upward mobility, and the economic benefits of film incentives are greatly exaggerated. A recent study by the Pennsylvania Legislative Budget and Finance Committee found that the state's $75 million program provides a net economic benefit of $4.5 million only when they assume that the entire industry, even those productions not receiving tax credits, wouldn't exist without the program.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.
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Tax Foundation Fiscal Fact, No. 210, "Florida's Sales Tax Holiday and Film Tax Credit Proposals Will Not Deliver on Exaggerated Promises," is available online at http://www.taxfoundation.org/news/show/25850.html. For more information in sales tax holidays, see Tax Foundation Special Report, No. 171, "Sales Tax Holidays: Politically Expedient but Poor Tax Policy," available online at http://www.taxfoundation.org/publications/show/25052.html. For more information on film tax credits, see Tax Foundation Special Report, No. 173, "Movie Production Incentives: Blockbuster Support for Lackluster Policy," available online at http://www.taxfoundation.org/publications/show/25706.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.