A Tax Revenue Source for Delaware
The Delaware Film Initiative has been vetted for two years by government officials to ensure it can be as beneficial for the state as possible. One of the requirements they originally provided us with is that the incentive program has to be "revenue neutral," i.e. work out in the long-run so that whatever money the state pays it makes back over time.
We decided to do one better.
We decided to make the film industry a significant revenue source for the state.
- First: our program is a loan guarantee program, not a handout or subsidy. This program is modelled on New Mexico's loan program, which has seen every dollar loaned out gets repaid, so Delaware starts at "revenue neutral." That means we get $1 back for every $1 guaranteed.
- Second: We conducted a thorough investigation into the likely job creation that this incentive would create, and then selected the most conservative estimate as to what that job creation would be. The personal income tax those jobs would increase our return to $1.20 for every $1 dollar guaranteed.
- Third: We added legislation that requires the celebrities, directors and producers to pay taxes in Delaware. They will financially benefit from our loan program, so they should at least pay their taxes here. Delaware would be the only state to require it, but producers have already told us that this upfront loan program is so much better than any other incentive they are happy to pay it. That increases our return to $1.33 for every $1 guaranteed.
- Fourth: We conducted a study to see what kind of tax revenues would be generated from our corporate income tax and hotel tax on the new film industry. Using data from the last seven years, and the most conservative model we could find, that additional tax revenue increased the return to $1.58 for every $1 dollar guaranteed.
- Fifth: We added a requirement in the bill that a Delaware Producer, recommended by the Tourism Advisory Board, must be listed with the film to ensure the films shoot at least 80% of the movie here in Delaware. That requirement means that Delaware will be getting promoted around the world in every film we support. New Mexico's film office conducted a study in their state and found tourism had increased by at least 5.5% annually because of their incentive program. The tourism industry generated $387 million in tax revenue for the state in 2006. A 5.5% increase in that revenue would bring the total return of the film incentive program to $2.35 per $1 guaranteed.
We've sought to utilize the most conservative figures in our estimates possible, and the most reliable data, but even if our estimated return were only half the state would still be making a surplus tax revenue.
The Delaware Film Initiative would build a half a billion dollar film industry in the state of Delaware over four years. It would do that by having the state set aside $12 million a year in a savings account that would guarantee the funds, and reinvesting a portion of the tax revenue generated from the industry. By doing that, the state would set aside $48 million over four years. In that time the film industry would generate $196.6 million in surplus tax revenue.
It would then go on to provide surplus revenue to the state of $63 million a year, plus an additional $21 million in tax revenue from the increased tourism, a total of $84 million in annual tax revenue.
And the state wouldn't have to spend another dollar after that to keep the program going. The loan guarantee fund would sustain itself through the tax revenue it creates.
Contact your Senator, Representative
Let Legislative Hall know that you want to see the film industry in Delaware.
Or call (302) 744-4171 and they'll direct you to the right office.
