During the rollout of his fiscal year 2016 budget proposal, Massachusetts Governor Charlie Baker proposed to repeal the state’s film tax credit in 2017.  While this tax credit has drawn criticism for its goal of providing public funding to an industry that is arguably financially viable, the public policy statement of “changing the rules of the game” for a fully functional industry in the state may have adverse economic consequences at a time when the state’s budget outlook—and political landscape—is shifting.

The film tax credit was signed into law in 2005 and was intended to sunset in 2013.  However, after hearing from industry representatives, unions and others about the credit’s success and the need for long-term stability for such incentives, the legislature extended the sunset date to 2023.  The governor’s proposal accelerates the sunset by making the repeal effective in 2017.

At a time when policymakers are less than enthusiastic about the projected slow growth in revenues for the next several years, and are seeking to rein in unnecessary budgetary expenses, the repeal of the film tax credit was offered up as a way to maintain fiscal stability while protecting the state’s most vulnerable populations and services.  However, recent commentary from key legislators in the House of Representatives appears to indicate that the repeal is not likely to gain traction in that branch any time soon.  Nonetheless, the legislation to repeal the tax credit remains under review and could be advanced at a later time, particularly in the more liberal-leaning Senate.

Looking beyond the film tax credit to state incentives in general, a significant conundrum exists when one “rings the bell” to suggest that a particular incentive or program may be on the fiscal chopping block.  Businesses, whether successful or not, often need long-term stability in order to plan ahead.  Further complicating the debate over the value of tax credits and other incentives is the fact that legislators often point to their own districts and constituents as having directly benefited from such programs.

Additionally, the House and Senate continue to spar over routine parliamentary procedures—the Senate wants more control over the ultimate fate of legislation, while the House wants to preserve the existing rules.  A temporary resolution has allowed the legislature to operate under the existing rules, but the impact of the spirited rules debate is yet to be seen.  It is possible that the debate has polarized the House and the Senate, a situation that will only exacerbate the difficulty of important public policy decisions, such as whether to repeal a particular tax credit.  But as is usually the case on Beacon Hill, the ultimate fate of any major legislative proposal will be determined by the fiscal condition of the state, the personalities in control of the legislature and the level of engagement by the affected industry.