There will be a budget shortfall for a decade

The residents of the Breaking Bad state should be asking their leaders how they could have let the streaming service swindle taxpayers out of so much money there will be a budget shortfall for a decade.

New Mexico

Netflix

New Mexico’s Netflix ‘Deal’ A Blow To State’s Finances

New Mexico remains among the most locked down states in the nation when it comes to the CoronaVirus. In October the State’s unemployment rate was among the highest in the nation at 8.1%. This difficult economic news combined with the election of a more “progressive” Legislature in November mean that tax increases (and even spending cuts) are likely in store for the upcoming 2021 legislative session. With New Mexico relying heavily on oil and gas revenues, the State’s economic pain will last beyond the coming year.

A new deal announced by Gov. Lujan Grisham with the well-known streaming service Netflix is being touted as good news for New Mexico’s economy. In announcing the deal the Gov. claimed, “My administration has expanded our state’s competitive film incentives, facilitating higher-wage employment for New Mexicans all across the state.” Under the terms of the deal, Netflix will dramatically-expand their footprint in the State spending $1 billion over the next decade.

Unfortunately, despite all the hype and big-sounding numbers, the Netflix deal is just another example of New Mexico’s economically-ignorant political leadership “buying” jobs and economic activity with taxpayer money. The reality is that New Mexico’s already strapped budgets will be drained even more in the years ahead by this new plan to subsidize Hollywood.

Something that too few in the media do is look closely at the particulars of the deal itself. For example: the State offers a 25% film “tax credit” which is really a rebate of 25% of the costs of production. Netflix is able to boost that rebate by another 5% since they are considered a “qualified” production facility. That means taxpayers will reimburse Netflix for 30% of their spending in NM. According to a new report from the Legislative Finance Committee (LFC) states that film subsidy payouts could increase annual tax credit payouts by $25 million beginning next fiscal year. – Source

New Mexico’s Filmmaking-Incentive Program May Be Too Attractive

SANTA FE, N. M.—For a poor state struggling to diversify its economy, a rush of Hollywood productions drawn to New Mexico’s rugged landscape and frontier vistas has been a boon. But state economists and lawmakers worry the tax-credit program attracting dozens of productions here—like the hit AMC show “Breaking Bad”—is unsustainable.

The program, created by New Mexico’s legislature in 2002, allows film and television companies to be reimbursed for 25% to 30% of taxable expenditures directly related to shooting in the state. It uses money from the state’s general fund that also finances public education.

The surge in production has spawned a rebate backlog that has left the state owing $180 million to the film and TV industry at the end of fiscal year 2018, said Jon Clark, chief economist for New Mexico’s Legislative Finance Committee. The debt is projected to rise to $250 million by the end of the current fiscal year in June and could reach $700 million by the end of the fiscal year 2023 if production trends continue, he said.- Source