Lawmaker Responds To Studio's 'More Tax Breaks Or We Walk' Letter With Eminent Domain Seizure Amendment
from the I-guess-it's-back-to-Hollywood,-where-people-treat-each-other-right dept
Here's the sort of thing that results when bad behavior is greeted with worse behavior.
The bad behavior is production companies seeking tax breaks. Politicians love to grant these tax breaks because a) they like having celebrities around and b) they've bought into the perception that somehow shooting a movie or TV series in town is a net fiscal gain for the community. Generally speaking, the first is almost always true and the latter is seldom ever true. A 2010 Tax Foundation study found that most cities granting tax breaks make back less than $0.20 per dollar "invested."
Media Rights Capital, the company behind Netflix hit "House of Cards," has already collected $26.6 million from the state of Maryland. But it isn't enough.
It began late last month when Charlie Goldstein, the senior vice president of Media Rights Capital, sent a letter to Maryland Gov. Martin O'Malley, threatening to leave the state if the show was not provided with millions of dollars more in tax credits for which it believes it should qualify.This is standard operating procedure for studios -- playing cities and states off each other in hopes of obtaining perpetually escalating tax breaks in exchange for a steadily diminishing ROI on taxpayer funds. Totally the sort of thing the state should have expected when it started handing out free money.
In the letter, Goldstein wrote that the company would "break down [their] stage, sets and offices and set up in another state."
The response, however, was even worse. Rather than calling the studio's bluff and helping it pack its bags, a legislator chose to do this:
Delegate Bill Frick introduced an amendment to a budget bill that would allow Maryland to seize the production company's property under eminent domain in the event it leaves the state.Of all the wrong things legislators have ever done, eminent domain is one of the very worst. Bill Frick has an excuse, however.
Frick said the move was inspired by the style of politics depicted on "House of Cards" and by the show's ruthless protagonist, Frank Underwood, who is played by Kevin Spacey. He told Business Insider, he thought, "How would Frank Underwood respond?" Frick said his eminent domain plan was the "most dramatic" thing he could think of to counter MRC's threat.In what will surely be recorded in the legislative history books as a "Frick move," a legislator has managed to outdo the studio in terms of sheer, manipulative nastiness. Yes, Frick would do Frank Underwood proud, but is that what we really want from our legislators?
Frick's amendment doesn't specifically name the studio but its cutoff line of $10 million or more in tax breaks leaves "House of Cards" stranded on an island made of taxpayer funds. It also puts the legislator in the rare position of openly espousing Marx's calls for the State to seize the means of production from the Elite, something that plays better in hazy dorm rooms than in a system where corporations have been determined to be "people."
While Frick's amendment passed a voice vote in the House of Delegates, the state Senate approved its own legislation -- which increases the tax credits available to companies -- with a 45-1 vote. Either way this pans out, the taxpayers will lose -- whether they're footing the bill for more tax breaks that won't create long-term wealth, or watching their representatives carve a legislative toehold for the future seizure of certain businesses.
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Filed Under: bill frick, eminent domain, house of cards, maryland, movies, studios, tax breaks, tv
Companies: media rights capital, netflix
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Not novel
You'd think they'd have learned.
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Re: Not novel
Sounds like a win to me to lose a moocher that leeches off the rest of the tax payers.
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It depends...
Actually this is true in some (many) cases. The key is to carefully balance the costs/gains. States and provinces that do this well have benefited. Oregon certainly realizes a positive ROI on it's very modest incentive program. British Columbia, Ontario and Louisiana have built thriving long term production industries through corporate bribery, most people in those states seem to think it a success.
But some states have given way too much for too little. Michigan's overspending debacle comes to mind. New York is spending huge sums, and many other states (for instance South Carolina, Georgia and Maryland) are spending considerable amounts. California is debating whether to budget 400 or 600 million (!) to this form of corporate welfare. I have to wonder how they can possibly get a positive ROI on this.
One thing to realize though, this is not new. Corporate subsidies have been going on for a long time, in all kinds of industries, not just mine. I'm not saying it's right or wrong, just calling for some perspective.
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• “The primary beneficiaries of the tax credit are film production entities.”
• “The majority of tax credits have been awarded to … companies that are not Maryland small businesses.”
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Giving money to studios as an "investment" needs to be done in a way that provides a reasonable chance of at least recouping that money. Specific targets should be set and each item properly identified and accounted for. They seem to be merely throwing money at these people for no reason other than the hope of meeting Kevin Spacey, or something.
FIFY
It's not about picking winners and losers, it's about being a good steward of other people's money, which they have entrusted to the state to be spent for their benefit. When the money is given to studios simply because they'll up and take their ball with them if they don't get it, the people don't benefit. That's bad stewardship.
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Re: It depends...
It's not clear this is true. It's a matter of some debate in Oregon, in part because there's no clear way of actually measuring what the return actually is.
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Re: It depends...
Sports franchises employ whores...errr..."economists" who specialize in producing reports for the consumption of legislators considering subsidies for the fat cat owners...errr..."revenue producing job-creators who own sports franchises", and they have a commonly-agreed-upon multiplier of 7. That is, for every dollar of taxpayer money handed over, the local economy benefits by a factor of 7. Such a deal.
Hollywood, not being averse to the over-the-top approach, may be using the Economic Development Authority's model, which, in a 2006 study undertaken in response to efforts to cut back funds handed over to campaign contributors...errr, sorry..."invested in local economies", declared a 31-to-1 multiplier!! Every dollar put forth by the EDA generated 31 dollars in magical investor money! That's one helluva multiplier.
Even without magic multipliers, (and not even considering access to famous actors, starlets, parts as 'extras' for family members (or in the case of sports team subsidies-access to athletes, free shoes and use of stadium suites)), of course a politician sees benefit in giving up incentives: if the"R"is yours and "I" is the taxpayers', it's a win/[redacted] situation, amirite?
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Don't let the door...
I take that back, if possible I would like to be standing there to slam it on your ass just before you make it out!
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Ilya Somin wrote about this over at Volokh on March 28.
There's a March 27 story in the Baltimore Sun.
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blaaaaaa
Blatant blackmail and i believe this should be stopped, if any tapxpayer money funds either a movie or tv show then that tv show and movie must be on all free to view channels and within 6 months free to download for anyone on torrent sites, No more getting taxpayer money to take something then charging the same taxpayer to watch the content they have paid to create.
Yes i am in a dream world but that just shows how far from reality the studios and politicians are.
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I hate it when that happens!
Unless it's me...
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Try and imagine the government being able to just take your stuff if you plan to leave the state. If the government has the right to do this to companies, they have the right to do this to individuals.
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Re: Re: Govt seisure
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> is a necessary evil at best. Using it to
> punish a company is unacceptable.
Agreed. Of two evils here, the idea of the state seizing (stealing) private property because the owners of it aren't doing what the government wants is abhorrent. It exhibits a clear lack of respect for the fundamental rights guaranteed under the U.S. Constitution and even introducing it should be grounds for the removal of the politician that thought it up.
On the other side of the equation, all HOUSE OF CARDS did was ask for tax breaks? Do they deserve them? No. Should they get them? No. Which is what Maryland should tell them. But they're free to ask and asking isn't even in the same universe of bad as the seizure amendment.
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Still...Goldstein's "They can't do this...can they?" reaction would have been entertaining as the show itself, eh?
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Eminent Domain = slippery slope.
Let's not go there.
If we must have it, keep it for egregious malefactors and criminals AFTER a successful prosecution. Grabbing people's stuff on the mere suspicion that they MIGHT be up to something naughty doesn't sit right with me.
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Nabbing stuff because assistance was received? I'm with you on that, Who Cares.
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There is no logical reason why the state would need the property in question. This would be simple retaliation against a company, with no public benefit. Passing and attempting to enforce this law would just result in the state losing a huge lawsuit.
And, you know, they'd have to PAY for that property. If they wanted to put conditions on the subsidies, they had to do that before they gave them, not after.
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I'd actually take the opposite view, on purely factual grounds. If the production company sought tax incentives under a premise of stimulating the state's economy in return, and instead they've been leaching and not holding up their end of the bargain, and now they're brazen enough to try and extort even more money out of the state, then the state has been defrauded and they very much do have a public-benefit interest in being made good, because that money that got ripped off was the public's money.
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Of course in many cases these things are just corporate welfare, and the companies receiving them don't really have any/many obligations beyond staying there for the duration of the incentives.
The way companies play states and municipalities off of one another in order to suck up public funds, I'm not sure that the best solution isn't for the federal government to levy a corporate tax that completely offsets these tax incentives, forcing companies to make decisions based on business concerns.
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This may vary from state to state, I don't know. But where I live this is absolutely not true. Yes, it's technically true, but the definition of "public purpose" is so broad that the most of the cases of eminent domain that happen consist of taking someone's property and selling it on the cheap to commercial developers to build yet another strip mall or something equivalent.
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After the Supreme Court's horrible, counterintuitive ruling in Kelo v. New London this is not a given.
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> it must be done for a public purpose.
Not anymore. Not after Kelo v. City of New London, 545 U.S. 469 (2005), quite possibly the worst Supreme Court decision in the last 50 years.
Now the government can take private property from one person and hand it over to another and that counts as a "public purpose".
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> than 'eminent domain'. Call it payment for what
> is owed.
I'm assuming you mean "Seize their assets"?
In any event, it doesn't matter what they call it, the 5th Amendment says the government can't just take private property without paying for it.
HOUSE OF CARDS fulfilled its contract with Maryland for the tax credits they've already received by shooting the first two seasons in Maryland. If Maryland wants them to stay, HOUSE OF CARDS is asking for a new deal. Maryland is not coming through with a new deal, so HOUSE OF CARDS wants to shop around elsewhere. That's perfectly acceptable behavior, and certainly nothing that should subject private citizens to property confiscation.
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I'm a little confused...
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Point of Clarification
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Re: Point of Clarification
Here's a definition from The People's Law Dictionary [law.com]…
eminent domain:
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Eminent Domain
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Re: Eminent Domain
LOL! I see what you did there...
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