March 5, 2011 / 8:40 PM / 6 years ago

New Mexico governor targets film incentives for cuts

SANTA FE (Reuters) - New Mexico's new Republican Governor Susana Martinez is taking aim at her state's film industry by capping tax incentives she calls a giveaway the state can no longer afford.

A proposal to cap the amount of rebates to filmmakers has cleared the New Mexico House of Representatives, and the Senate is expected to vote on the measure in coming days.

New Mexico is not alone in taking a hard look at the tax credits. Georgia, Pennsylvania, Connecticut and Michigan also are considering cuts in their programs, which supporters call critical to nurturing a healthy, jobs-producing film industry.

Since taking office in New Mexico, Martinez has lobbied to cut the rebate program, saying it takes away from the state's permanent fund for education. She calls it a "subsidy to Hollywood on the backs of our schoolchildren."

The proposed subsidy cap that passed the House this past week 53-17 would limit the amount of film rebates to $45 million per year. The highest amount to date was $76 million in 2009.

Martinez spokesman Scott Darnell said the governor was pleased with the bipartisan House vote.

"The Governor is focused on balancing the budget -- closing a $450 million deficit -- without raising taxes on New Mexico families and without cutting funding to the classroom and healthcare for those most in need," Darnell said.

Opponents call the cuts a death knell for the state's burgeoning film industry and an attack on organized labor.

"The governor's proposal would kill the film industry," Eric Witt, who heads the Motion Picture Association of New Mexico, said on Friday.

"We have set a gold standard for film production, but if we start lowering incentives, we're off the table," he said.

Former Democratic Governor Bill Richardson in 2003 increased the state tax rebate to 25 percent from 15 percent to lure film and TV crews. The rebate means a quarter of any qualified film expenditures in the state are returned to filmmakers.

About 20 states give more generous tax credits, including Louisiana and New York which give 30 percent, Witt said. Utah has proposed to increase its program to 25 from 15 percent.

Santa Fe Democratic Rep. Brian Egolf called the cap a "purely political decision" based on the film industry's strong unions.

"If it's really about money, then let's look at oil and gas," said Egolf, whose proposed amendment to lower tax incentives to oil and gas companies was voted down.

Many big-budget movies have been filmed in New Mexico in recent years, including Oscar winners "No Country for Old Men" and "True Grit."

A new film, "The Avengers" with Scarlett Johansson, Robert Downey Jr. and Samuel L. Jackson, is scheduled to begin shooting next month.

The state has invested millions of dollars in developing film infrastructure, including technical training at local colleges and creating state-of-the art sound stages for pre- and post-production.

In an Op-ed piece in The New York Times in February, Richardson criticized Martinez's arguments that pit films against students. He called the incentives an economic boon for the state and a way for the world to learn about New Mexico.

Richardson wrote that the industry and supporting businesses created 10,000 jobs and brought in nearly $4 billion to the state over eight years.

"Any program that's a positive for the economy benefits everyone, including children," Richardson wrote.

Editing by Corrie MacLaggan, Peter Bohan and Ellen Wulfhorst

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