A few weeks ago, officials shut down Loop 202 in Mesa to film a crash scene for the upcoming movie, The Kingdom. The flaming cars were the first tangible results of Arizona's new motion picture tax incentive program which took effect this spring.
Qualifying film production companies are eligible for a corporate income tax credit equal to 10-20 percent of in-state production costs. They are also 100 percent exempt from state and county sales taxes.
These tax incentives underscore how much regular Arizonans pay in sales tax: $877 per capita, the tenth highest amount in the nation. Arizona vaults to number five when excluding states without income taxes, which tend to depend more on sales taxes.
Tax credit schemes implicitly acknowledge high tax burdens. If this weren't the case, why would they have to be lowered to attract Hollywood?
The Kingdom's producer recently said "[The] motion picture tax incentive is the reason our production came to Arizona." Great. But why not lower taxes and provide this type of incentive to all industries?
A better policy would be to eliminate the corporate income tax. That way all businesses contributing to Arizona's growth would benefit, not just movie moguls.
Noah Clarke is an economist with the Goldwater Institute Center for Economic Prosperity.
-Goldwater Institute: "Corporate Tax Reform: How to Woo Business Without Spending a Dime"
- Arizona Republic: "Loop 202 stars in movie crash scene"
- Arizona Capitol Times: "Film Starring Jamie Foxx is 1st to Use New Tax Incentive"
-Tax Foundation: "General Sales Tax Collections by State"