Tax Law

State Net Capitol Journal – April 14, 2014; Maryland Comes Up Short on ‘House of Cards’ Tax Breaks

Budget & Taxes

MD COMES UP SHORT ON 'HOUSE OF CARDS' TAX BREAKS: The charm of Kevin Spacey, the star of Netflix's hit original series "House of Cards," evidently wasn't enough to sway Maryland's General Assembly to meet the tax-credit ultimatum issued by the show's producers. In February, Media Rights Capital of Beverly Hills informed Gov. Martin O'Malley (D) and the state's lawmakers that if they didn't provide it millions of dollars more in tax breaks, it would have to pull the production out of the state. And last month, Spacey, who plays the unscrupulous Washington politician Frank Underwood on the show, visited Annapolis in an effort to "whip" up votes for the tax-break boost.

But although the state's lawmakers agreed to set aside $15 million in next year's budget for film and television industry incentives and had $4 million left over from their allocation for this year, they failed last week to approve $3.5 million more to cover the gap between that $19 million and the $22.5 million that had been applied for by "House of Cards" and another TV series, HBO's "Veep."

Some lawmakers simply weren't sold on the idea of giving away so much of taxpayers' money.

"At a time when we're not able to cover all the things we need to cover in the budget," said Del. C. William Frick (D), $18.5 million for film and television incentives seemed excessive.

But the Senate rejected budget language approved by the House authorizing the state to use "eminent domain" to seize the property of any production company that stops filming after receiving more than $10 million in tax credits from the state.

"It sent a horrible message to the business community," said Senate President Thomas V. Mike Miller.

And Miller actually seemed confident O'Malley would be able to negotiate a deal to keep the productions shooting in Maryland.

"We're going to keep them," he said at a bill signing ceremony last week.

The MRC lobbyist in Annapolis, Gerard Evans, meanwhile, said the producers of "House of Cards" "haven't given me a signal yet" about the future of the series. (BALTIMORE SUN, STATE NET)

STATES TAKE INITIATIVE ON INFRASTRUCTURE FUNDING: In the past year, six states and the District of Columbia have raised their gasoline taxes to pay for highway construction. Wyoming nearly doubled its gas tax from 14 cents per gallon to 24 cents, which is expected to generate over $70 million for highway repairs and other projects. Pennsylvania took a different approach, scrapping its 12-cents-per-gallong gas tax and raising taxes on oil distributors to provide $7 billion in funding for repairing and repaving its aging roads and bridges. And other states, such as Maryland, Vermont and Virginia, have revamped their gas taxes so they rise and fall with the wholesale price of gas or inflation.

A number of cities and states, including Indiana, New York and Texas, have also recently teamed up with private companies to build roads, bridges and other infrastructure previously funded by federal gas-tax dollars or bond offerings. Those partnerships bring the total number of states using such arrangements to 11, encompassing an estimated $15 billion in infrastructure projects, according to the trade publication Public Works Financing.

The state and local efforts come after years of failed lobbying to get Congress to raise the federal gas tax — the nation's primary source of funding for highway and transit projects — which hasn't budged from its 18.4 cents-per-gallon level for more than two decades due to partisan gridlock and public opposition. Consequently, gas-tax revenues have lagged far behind the costs of labor and material for transportation projects.

"There's no business in the world that can be successful with expenses that grow with inflation and revenues that don't, and yet that's basically what's happened" with transportation funding, said Delaware Gov. Jack Markell (D). (WALL STREET JOURNAL)

BUDGETS IN BRIEF: NEW YORK Comptroller Thomas DiNapoli reported last week that the chronic lung disease asthma costs the state over $1.3 billion each year in medical costs and lost productivity. He also said asthma-related Medicaid expenses have risen over 26 percent in the past five years (BLOOMBERG). • TENNESSEE Gov. Bill Haslam (R) has proposed a budget for next fiscal year that would cut tourism spending by half, from $8 million to $4 million (TENNESSEAN [NASHVILLE], STATE NET). • MAINE Gov. Paul LePage (R) allowed a supplemental budget bill filling a $40 million shortfall in the state's 2014 budget and an $18 million shortfall in the 2015 budget to become law without his signature. LePage had opposed many of the proposed budget fixes but had offered no alternatives of his own (BANGOR DAILY NEWS). • The KANSAS Legislature passed a bill (HB 2506) last week that allocates $129 million to address inequities in the state's public school funding system but also strips teachers of their right to due process hearings, a protection they've enjoyed since 1957 (WICHITA EAGLE, STATE NET).

- Compiled by KOREY CLARK

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