February 2008

Starstruck? Connecticut's Block-Busting Spending on Entertainment Industry Tax Credits - Part 1: The Credits and Who is Claiming Them

Shelley Geballe, JD, MPH

This report on the state's "film" tax credits raises questions about whether Connecticut is getting the best return on its economic development investment by putting such emphasis on this single industry. Connecticut has emerged as "the most generous state in the country for filmmakers," and these new tax credits already are draining an enormous amount of revenues from the state. The estimated FY 2009 revenue loss is $116 million, or more than a third of Connecticut's total business tax credits and about a quarter of total projected corporate business tax revenues in FY 09. Connecticut's tax credit-based investment in its entertainment industry far surpasses comparable investment in any other Connecticut industry or business activity through tax credits. The entertainment tax credits are $21 million greater than the total FY 09 bond funding for the Connecticut State University System's 2020 infrastructure project; eleven times greater than FY 09 grants for stem cell research, and five times greater than the FY 09 funding increase approved last Session to expand school readiness to 4,100 additional children.

What has not been determined to date is whether these credits truly pay for themselves through increased income, sales and other tax revenues. Neither has it been determined through an independent evaluation whether an investment of this scale in the entertainment industry provides the best return on Connecticut's investment, or whether investing also in nanotechnology, biotechnology, green energy and other emerging industries might provide even better long-term return.

Issue Area:
Budget and Tax