The tax break for Feature Films created this year has apparently been stripped out of the stimulus package thanks to the efforts of a few sound-bite seeking politicians like John McCain who saw an easy publicity mark and went after it. In doing so we are losing not just a direct, quick, and effective stimulus to the economy but also one which could in fact become revenue producing.
There was a production boom in the industry in the late 70's and 80's thanks to an effective tax shelter program which proved to be a boon to both the Major Studios and, perhaps more importantly, Independent Film Production. We could recreate that stimulus with this opportunity which could reward creativity in financial structuring and help the Government increase revenue.
Taking a lead from the executive compensation cap Obama announced today, what they should do is to offer a conditional based tax break for Movies produced this year under similar guidelines. Imagine a deal like this: for a film taking the tax break, compensation for any individual would be capped at $500,000, extra compensation would be allowed in the terms of net points in the film after the amount of tax credit is paid back to the Government from revenues, and an additional residual paid to the Government at a rate of 50% of the percentage that the tax credit is to the sum of the total budget plus the credit. In essence, the Government would become an investor in the film without laying out any cash and paid back under the same guidelines and pari passu with any investor. Films produced under the program would stimulate the economy immediately in terms of jobs, payments to vendors, location and permit fees, hotel, restaurants, etc...countless direct payments into the economy while potentially paying back the lost revenues from taxes and in some cases going beyond with profit payments as well.
Our Senators (are you listening Boxer and Feingold?) should be using this opportunity to look for creative solutions to respond to any criticism of programs before just rolling over like they've done today.