Netflix subscribers who have been binge-watching the new season’s “House of Cards” need to send their gratitude to Maryland taxpayers. In a real-life drama that could be straight out of a “House of Cards” scene, the show’s producers have been binging on Maryland taxpayers’ money, while schmoozing and extorting legislators whenever necessary.
Maryland offers a fully refundable tax credit that covers up to 25 percent of filmproduction costs incurred in Maryland. For television series, this increases to 27 percent. For the credits to apply, least half of the principal photography must take place in Maryland, and in-state productions costs must exceed $500,000.
In 2013, two television series, “House of Cards” and HBO’s “VEEP,” took all of Maryland’s credits. Maryland’s film production tax credit program is not designed to help small, local filmmakers—it is meant to subsidize rich Hollywood producers.
Living High on Taxpayers’ Dimes
Since Maryland’s program was updated in 2012, $62.5 million in credits have been authorized. Of this total, 97 percent has been awarded to “VEEP” ($22.7 million) and “House of Cards” ($37.6 million).
Proponents of film tax credits argue that productions boost employment, promote tourism, and increase tax revenue. These claims are all false. In reality, film tax credits only help a small slice of the economy at the expense of most taxpayers.
Tax credits are more valuable than deductions because, while deductions lower taxable income, credits directly reduce tax bills. When these credits are refundable, as they are in Maryland, states actually pay production companies the difference if the tax liabilities are lower than the amount of the credit. As stated on The Maryland Film Office’s website, “If the tax credit allowed in any taxable year exceeds the total tax otherwise payable by the qualified film production entity for that taxable year, the qualified film production entity may claim a refund in the amount of excess.”
Qualified film production activities are also exempt from sales and use taxes. This has led to foregone revenues in Maryland alone totaling $17.8 million since 2001, including $4.0 million in 2013 and $3.7 million in 2014.
Total Maryland film tax credits are supposed to be capped at $7.5 million, but for fiscal year 2014, this cap was temporarily increased to $25 million. This $25 million is more than the business tax credits given to cybersecurity, wineries, biotechnology, job creation, and research and development—combined.