House of Cads: Netflix Show Plays Ransom Drama With Taxpayers

Isaiah J. Poole

The second season of “House of Cards” debuted on Valentine’s Day last week, but one week later the show’s producers are complaining that they’re not getting enough love from Maryland taxpayers.

They’ve notified Gov. Martin O’Malley that “we will have to break down our stage, sets and offices and move to another state” unless the state of Maryland provides “sufficient incentives” to stay. Incentives, in plainspeak, are tax giveaways.

It’s true that this sort of corporate behavior has been routine for decades, but it still shocks the conscience when the same executives who bankroll politicians who rail against “entitlements” for financially struggling people hold their hands out and exhibit shameless entitlement themselves. Their behavior fuels a race to the bottom, as states outbid each other to woo businesses by offering the most tax giveaways.

The race goes on despite increasing evidence that the state tax incentives to corporations don’t really work as promised. That includes incentives to the film industry, as David Sirota at PandoDaily reported this week.

“Perhaps diverting so much money from basic public services and giving it to wealthy media conglomerates might be justifiable if doing so was a proven way to create jobs and generate a net tax revenue gain,” Sirota wrote. “But in its state-by-state analysis of the subsidies, [the Center for Budget and Policy Priorities] notes it is quite the opposite: “The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state(s).”

Sirota says the same thing is true of Canada, a favorite stand-in for the United States for tax-averse filmmakers. “British Columbia’s massive film subsidies appear to be generating about $100 million a year in net revenue losses, all while the province reduces funding for basic government services,” Sirota reports.

With respect to “House of Cards,” Sirota in a follow-up report cites a Maryland Film Office report that says film industry incentives “do not generate a
corresponding amount of offsetting tax revenues” – in fact, “57.6 percent of each dollar of incentive is recovered in state and local tax revenues.” The report adds that this does not account for “the significant indirect impact” of filmmaking attracted to the state, but adds that “it is virtually impossible to make a clear distinction” between projects that would be shot in Maryland anyway and those that are in the state for the tax incentives.

Particularly disingenuous is the statement in the letter from the MRC production company that it is “required to look at other states” in search of more generous tax breaks; “we would not be responsible financiers and a successful production company” if we weren’t greedy money-grubbers lining our pockets with money that should go to local schools and other needs. There is, in fact, no such “requirement.” Some companies recognize that their success is built on the services that government provides, from the roads that the film crews use to travel, to the police and fire departments they rely on for protection, to the schools that educated the people who work on the set. These companies see their “requirement” as making sure they pay their due toward the public resources that enable them to thrive.

It’s hard to stop corporations from pitting states against each other as long as there are at least some states desperate enough or foolish enough to play along. Nonetheless, it’s time for someone to draw the line. Companies like the one backing “House of Cards” don’t want to be held accountable for the implicit promise of any tax incentive – that the taxpayers are getting more tangible benefits out of the deal than the cost of the incentive. That’s the minimum requirement that any state legislature – and for that matter the federal government – must insist on. Otherwise, taxpayers should tell corporations that brandish threatening ransom letters demanding ever more costly tax giveaways to take their cards elsewhere.

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