Monday, July 9, 2012
The Positive Economic Impact of Tax Credits
On this blog we have discussed at length the various ways tax credits can benefit a state. They circulate money back into an economy to increase spending, provide incentives to clean up dilapidated sections of town raising property values, and provide an engine for job creation. While we focus mostly on tax credits in the Southeast, particularly South Carolina, there are plenty of other parts of the country that have seen the benefits of such credits. Below are just three examples of many:
In order to boost a still recession injured economy, the Rhode Island Public Expenditure Council voted to temporarily reauthorize the already effective Historic Preservation Income Tax Credit. The credit is similar to South Carolina's recently stalled Abandoned Buildings Revitalization Act. The credit itself allows a developer to recoup 30% of the costs of approved rehabilitation work, providing an incentive to undertake potentially expensive projects that may not visit direct benefits on the developer.
Both the economic and non-economic benefits of the tax credit are touted. In general, preserving buildings is not only cheaper than replacing buildings in many cases, but the process of declaring buildings historic (and therefore eligible for a tax credit) increases property values. Non-economic benefits include the “preservation of a culture and community” according to RIPEC, as well as aesthetically improving a neighborhood.
The authorization of this tax credit is only temporary - full reauthorization will only come as part of a full evaluation of the state’s tax policy. While RIPEC agrees with the need to perform due diligence, it strongly advocates the long-term economic benefits of such credits.
In a case of absence making the heart grow fonder, the Oklahoma state legislature ended a two-year suspension of an energy efficiency tax credit on July 1. Now, builders once again have the incentives to increase energy efficiency in newly built homes. Hopefully this will reduce the drop off in quality noted by the head of an Oklahoma City based green construction inspection company Guaranteed Watt Saver.
Some expenditures eligible for as much as a one-to-one tax credit include energy-efficient heating and cooling systems, roofs coated with materials to reduce heat gain, and improved insulation. The credit can range from $2,000 to $4,000. However, Todd Booze, vice president-secretary of the Oklahoma State Home Builders Association sees this as a valuable long-term investment. The long term housing stock will be improved and those who buy the energy efficient homes can save up to $2,000 a year.
If you are one of the millions of people who saw The Avengers this summer, not only did you see The Incredible Hulk put Loki in his proper place, but you also got a glimpse of metropolitan Cleveland, Ohio. This is largely due to the efforts of Ivan Schwarz and the Greater Cleveland Film Commission, who were largely responsible for encouraging the Ohio legislature to create a $20 million tax incentive for Hollywood movie makers to film in the city. By all accounts, the tax credit has been a resounding success.
The credit reimburses producers up to 25% of dollars spent in Ohio and up to 35% of money spent paying wages to Ohio employees. The credit has proved so popular that Governor John Kasich signed a bipartisan bill to double the available money for the tax credit to $40 million in both 2012 and 2013. However, it’s not just big budget Hollywood films that are eligible for this credit—documentaries, commercials, and even video games are eligible for the $40 million tax credit pool.
According to a study by Cleveland University, Ohio has reaped a return of $1.20 for every $1.00 spent on tax credits, including ones for the movie industry. Ohio’s filmmaker’s tax credit, Rhode Island’s historic preservation credit, and Oklahoma’s energy efficiency credits are three of many examples of how such credits can create jobs, improve neighborhoods, create disposable income, and generally improve quality of life. Hopefully for the next legislative session South Carolina will follow the lead from other states and pass the Abandoned Building tax credit and other potential economy improving tax credits.
at 10:30 AM