The tax cut, designed to entice Hollywood and TV producers to shoot their films domestically, will cost taxpayers $358 million in 2009 and $470 million by 2018, the report states.
Described in the financial bailout bill as an “expansion and extension” of a nearly identical provision in a 2004 law, the revision now allows producers to write off $15 million in production costs on any movie they produce and slashes a restriction in the 2004 law that excluded films with budgets of over $15 million.
The current legislation would also allow filmmakers filming in the United States to qualify for a tax deduction, capping the top tax rate at 32 percent instead of 35 percent.
“A taxpayer may elect to treat the cost of any qualified film or television production as an expense which is not chargeable to a capital account. Any cost so treated shall be allowed as a deduction,” states the original tax break, passed in a corporate tax bill in 2004 and extended in the $700 billion economic stabilization package.
Dan Glickman, chairman and CEO of the Motion Picture Association of America (MPAA), told CNSNews.com in a statement on Monday that he thinks these tax cuts will help the U.S. economy.
“This could not come at a better time for our economy, particularly for the growing number of states where film and television production means real revenues, real jobs, and real local economic activity,” said Glickman.
“This puts our industry, which employs 1.5 million Americans, on equal footing under the tax code with other leaders of the U.S. economy, and will help keep jobs and film production here in the United States,” he added.
But Stephen Ellis, vice president of Taxpayers for Common Sense, a conservative group, told CNSNews.com that while he is not opposed to tax cuts, Americans should be given a chance to carefully examine such expenditures.
“The problem is that we need to look at all of these provisions and see if they still make sense for taxpayers in light of our current economy,” Ellis told CNSNews.com.
On Sept. 23, before the bailout package passed, a nearly identical provision was passed by the Senate in a 92-3 vote as part of a $100 billion tax package. But it failed when fiscally conservative House Democrats, known as Blue Dogs, and House conservatives objected because its costs were not offset within the budget and therefore would have added to the federal deficit.
But later in the month, after the first bailout had been defeated in the House by 12 votes on Sept. 29, the provision for Hollywood was added to the bailout as part of what became known as a “sweetener package” to attract members who were reluctant to vote for the $700 billion bill.
On Sept. 24, Sen. John McCain (R-Ariz.) told a crowd at a campaign stop in Freeland, Mich., that adding “any kind of earmark”’ to the bailout plan “simply cannot happen.”
"It is completely unacceptable for any kind of earmarks to be included in this bill," he said. "It would be outrageous for legislators and lobbyists to pack this rescue plan with taxpayer money for favored companies. This simply cannot happen.”
On Oct. 1, however, McCain joined his opponent for the White House, Sen. Barack Obama (D-Ill.), in casting his vote, as a senator, in favor of the bill.