There Are Credits, and There Are Credits
I may be incorrect about this, but the historic tax credits appear to be of a different nature than the movie industry tax credits. The latter are ultimately advance giveaways of tax money yet to be collected. The credits are handed to a production company, which can sell them to third-parties that aren’t at all involved in the filming to offset taxes that they were going to pay anyway. It’s a subsidy.
The historic tax credit, it seems, is more of a discount on taxes related to projects that may not happen without the incentive:
The 1891 estate with 12 bedrooms, 15 bathrooms and breathtaking ocean views is among the many properties that qualified for Rhode Island’s historic structures tax-credit program, which offers property owners and developers breaks on income taxes worth 30 percent of qualified historic-renovation costs.
Working in construction, I suppose I’ve an indirect interest in these credits, but I’m more or less ambivalent about them. That said, such credits follow a model that Rhode Island should implement more broadly: encouraging economic activity by discounting the costs imposed by government. Consider:
Governor Carcieri recently introduced a separate proposal to retroactively cap the number of credits redeemed every year, a move that would save nearly $25 million this year and $21 million in the next. Several real estate developers plan to sue the state if the governor’s plan becomes law, according to local developer Colin Kane, head of the Peregrine Group, which has invested $15 million in an East Providence development he says he would have to abandon.
One must adjust for words spoken in advocacy, of course, but it isn’t a stretch to imagine that such projects as Kane’s wouldn’t happen under the full burden of Rhode Island’s tax laws. In other words, without them, there would be less economic activity for the government to tax in the first place.
Watching our government attempt to digest its deficit in the absence of one-time windfalls (or failing to digest it) brings to mind the game of chess. Nobody seems capable of thinking more than two steps ahead (to the step after “I lose my giveaways and special interest support”). That’s a queen that ought to be exposed.