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STATE FILM SUBSIDIES: NOT MUCH BANG FOR TOO MANY BUCKS


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Now, if we could get the US States to do this:

 

http://realfilmcareer.com/europe-rethinks-film-subsidies/

 

European Commission plans incentives cap

By IAN MUNDELL

 

BRUSSELS — The European Commission has proposed caps on how much public subsidy money can be used to tempt foreign film production to the region.

 

The aim is to prevent European countries from using subsidies to compete among themselves for prestigious Hollywood projects.

 

Non-Euro filmmakers bringing productions budgeted below €10 million ($13 million) to Europe will be allowed to draw up to half their coin from local subsidies, the same allowed to local films.

 

But aid for foreign films with budgets between $13 million and $26 million would fall to 30%, and drop to just 10% for films budgeted above $26 million.

 

“Setting a cap will ensure that other parameters for the location decision-making, such as the quality of local crew, stages and technology remain decisive, and that competition takes place primarily on the basis of quality and price, rather than on the basis of state aid,” the Commission said in a policy document proposing the limits.

 

The proposals, released for consultation Wednesday, are part of a review of Euro law on subsidies for film production. The current rules, set in 2001, lapse at the end of this year.

 

The proposals also suggest loosening territorial requirements in incentive schemes. This will give producers greater freedom to combine subsidies across the region.

 

Subsidy schemes usually demand that productions invest a minimum amount locally to receive government coin. Under present rules that can be up to 80% of a film's production budget.

 

The Commission wants to limit such pre-conditions to the amount of subsidy on offer. This means governments will only be able to insist on recovering their investment, but not use the system to lock in a greater return or lock out other territories.

 

While this will make it easier for films to get into the competition for subsidies, success is not guaranteed. Selection committees will still be free to favor projects that offer the most attractive local returns.

 

Schemes that use local production spending to work out the level of subsidy, such as tax breaks, will have to take into account all production spending in the European Economic Area when calculating awards. Such schemes will still be allowed to insist that 100% of the tax incentive is spent in their territory, however.

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"But aid for foreign films with budgets between $13 million and $26 million would fall to 30%, and drop to just 10% for films budgeted above $26 million."

 

Great news for Canada, no caps here, if the Europeans go ahead with this they'll drop another huge chunk of Hollywood business right into Canada's lap.

 

R,

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"But aid for foreign films with budgets between $13 million and $26 million would fall to 30%, and drop to just 10% for films budgeted above $26 million."

 

Great news for Canada, no caps here, if the Europeans go ahead with this they'll drop another huge chunk of Hollywood business right into Canada's lap.

 

R,

 

 

Real question here, if Canada continues to hand out Corporate Welfare like this, how will the tax-starved provinces and nation pay for all the socialized services you currently take for granted? Certainly any income that Canadians earn in those temporary jobs can't possibly make up for the millions (billions?) in Corporate Welfare/Bribes that are handed out.

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Real question here, if Canada continues to hand out Corporate Welfare like this, how will the tax-starved provinces and nation pay for all the socialized services you currently take for granted? Certainly any income that Canadians earn in those temporary jobs can't possibly make up for the millions (billions?) in Corporate Welfare/Bribes that are handed out.

 

Well you need a clearer understanding of how the tax credit system works here. First off the provinces are not all that cash starved, you keep forgetting that Canadian taxes are through the roof compared to the USA. Sales tax in Ontario is 13%, and we pay a hell of a lot more for gasoline than you do because of all the built in taxes. Canada's debt to GDP ratio is only 3%, compared to America's of 16%. So Canada's balance sheet is by far the best in the G8, everyone knows that. Remember....we didn't need to spend billions bailing out banks like you did. The banks are heavily regulated in Canada to prevent such financial nonsense in the first place.

 

So with Canada's higher taxes the tax credit system is basically "revenue neutral." It doesn't cost the government in pay outs, because the taxes paid by the film workers are about equal to what the producer receives as a tax credit. Also keep in mind, the government here pays zero tax credits on non Canadian residents. In order for the producer to obtain the tax credit on a worker's salary they must be a Canadian citizen and filed tax returns in Ontario for two years.

 

There is a shortage of both crew and equipment in Toronto right now, and Toronto had its biggest year ever last year. Propelling Toronto back to the number three spot of production centres. This year looks like it will be even bigger.

 

If Europe does what they are planning to do, it's going to go even more nutso bananas here as more producers look to bring larger scale projects to Canada. And when I say Canada, I mean Toronto or Vancouver.

 

So yes, the film tax credit system works very well here. And since it does work well, it won't be long before the politicians decide to mess it up.

 

R,

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Well you need a clearer understanding of how the tax credit system works here. First off the provinces are not all that cash starved, you keep forgetting that Canadian taxes are through

 

So with Canada's higher taxes the tax credit system is basically "revenue neutral." It doesn't cost the government in pay outs, because the taxes paid by the film workers are about equal to what the producer receives as a tax credit.

 

 

So, this means that labor pays all the cost for running government while the "corporation" skates off without paying a dime for the privilege of running a business with the benefits the government provides AND the "corporation" runs off with all the profit, giving not a penny to the government or anyone else? Sweet deal for the wealthy business owners. No wonder the Middle Class is vanishing across the globe while the wealthy just get wealthier.

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So, this means that labor pays all the cost for running government while the "corporation" skates off without paying a dime for the privilege of running a business with the benefits the government provides AND the "corporation" runs off with all the profit, giving not a penny to the government or anyone else? Sweet deal for the wealthy business owners. No wonder the Middle Class is vanishing across the globe while the wealthy just get wealthier.

 

Well no, not at all. The producer needs to spend a dollar on labour to get 45 cents back. Do you think it's a good investment to get .45 back on every dollar you spend? Would you give me $1000.00 right now so I can give you $450.00 back?

 

The producer is still risking a lot of money, the tax credit is a subsidy, there is no possible way to turn a profit on it. Plus the government insists that the producer spend all the money FIRST, and then after an exhaustive audit process that takes 18 mos, the producer will see his cheque. Which again, is a partial refund on labour, it's not profit to any degree.

 

Also, a "producer" can be anyone. Their personal net worth means nothing, they can have a dollar in the bank and still qualify for the tax credits.

 

R,

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FYI, this on another thread in the General Topics forum:

 

"In a sign of the growing attraction of tax reliefs, the US drama maker HBO now films 85% of its productions in countries offering discounts. A few years ago this was just 10%."

 

R,

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Well no, not at all. The producer needs to spend a dollar on labour to get 45 cents back. Do you think it's a good investment to get .45 back on every dollar you spend? Would you give me $1000.00 right now so I can give you $450.00 back?

 

The producer is still risking a lot of money, the tax credit is a subsidy, there is no possible way to turn a profit on it. Plus the government insists that the producer spend all the money FIRST, and then after an exhaustive audit process that takes 18 mos, the producer will see his cheque. Which again, is a partial refund on labour, it's not profit to any degree.

 

Also, a "producer" can be anyone. Their personal net worth means nothing, they can have a dollar in the bank and still qualify for the tax credits.

 

R,

 

 

I understand all of that. What it looks like is that the Corporation is paying zero tax to the city/state/territory/national government that it exists in. All taxes to keep the infrastructure of the nation intact are paid for by the employees...while the Corporation rides off into the sunset with any and all profits. The government that forked over the taxpayer provided subsidy sees zero return on its investment into a private sector product. Right?

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I understand all of that. What it looks like is that the Corporation is paying zero tax to the city/state/territory/national government that it exists in. All taxes to keep the infrastructure of the nation intact are paid for by the employees...while the Corporation rides off into the sunset with any and all profits. The government that forked over the taxpayer provided subsidy sees zero return on its investment into a private sector product. Right?

 

No that's not correct at all. When I produce a movie in Canada, I set up a single purpose corporation for this purpose. The corporation will receive the tax credits, which have already been loaned to it via the bank. When the tax credits come in, the bank takes the money and pays off the loan. The producer does not see a penny.

 

The movie is now sold around the globe, as the movie is sold, profit is generated. The government takes a big chunk of this revenue in taxes. No movie, no revenue. So why you think the "Corporation rides off into the sunset with any and all profits." boggles my mind. In order for that to happen Canada would need to have a corporate tax rate of zero. And it's no where near that low I assure you!!!!

 

Also, keep in mind that government subsidies have a strong tradition in Canada. People accept them here as a normal way of life. In Canada we have companies called "Crown Corporations" these are businesses owned and operated by the government and they receive a giant chunk of tax money every year as well. The CBC (Canadian Broadcasting Corporation) is one such example, the government runs it and gives it 1 billion a year for operating costs. In addition the CBC competes in the private sector to capture ad revenue, while at the same time receiving a 1 billion dollar a year tax payer funded endowment.

 

There isn't a single example of a Crown Corporation anywhere in the USA.

 

You just have to accept the fact that Canada is a foreign country and we have a different way of doing things here and different mentality.

 

R,

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I'm living in Minnesota at the moment, and we had a similar experience to NM in the 90's. After a burst of Fargos and Grumpy old Men and Mighty Ducks, the subsidies dried up, and the industry took a big hit. Right now, it gets by mostly on commercial work for big companies that like to keep their production in-state (3M, Best Buy, etc). Even though I work in film, I tend to agree that a straight rebate to major production companies is not money well spent--the money spent to subsidize one 10 million dollar film (2.5 million at our current rebate) provides jobs for a few dozen local workers (key crew is flown in from LA or NY), has very little long term benefit, and is a substantial net loss for the state government. It's a nice prestige program if you're the only state in the game, but trying to compete against Iowa and Michigan in the hand-out contest would just be a race to the bottom.

 

I believe our film commission is heading more towards grants for local filmmakers (they don't have much choice--I don't think their allotment for the year can cover the rebate of even a modest indie film). These days, I'm more about encouraging local content than drawing in big movies from out of state.

 

I think the big reason that Canada/Toronto has stayed a strong player as a satellite hub for LA is that the Canadian Government picked a policy and stayed with it--for better or worse, American producers came to rely on it as a cheap place to set up shop, and the industry could lay down roots--and most importantly, allowed local content to blossom, leaving a baseline of work even when currency fluctuation puts a dent in the work coming in from over the border. I'm not against subsidizing private industry (even public roads are a subsidy in a way)--but if you don't maintain the roads, it's just throwing money into the toilet. Dramatically shifting policies every four years is worse for the industry than doing nothing at all--it encourages fly by night producers to swoop in and get their rebate, and does nothing to keep the industry healthy or sustainable, and it's pretty irresponsible of our state legislators to create and destroy programs like this on a whim.

 

Our previous governor's administration tried to pull the rebate out from under the nose of the first major film to shoot here in two years--after all the paperwork cleared. Even though they failed, I think it was an embarrassment that pretty much killed any chance of reviving that part of our film industry, if there was any hope to begin with. On the up side--we're not toast yet, and what MN *does* do reliably is fund the arts... now to convince a bunch of suburban and rural legislators that film is an art, like theater, or conceptual dance, or underwater basketweaving...

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Christ on a Harley Davidson, are you mad?

 

The last thing, absolutely the last thing you want is for film to be reduced to the level of an independent artform, as it has been in the UK. If you start funding it like creative dance, you'll get $5 and told to go and shoot miniDV (they'll think this is modern and progressive).

 

I live in a place where this has occurred and it is awful beyond words.

 

Film is a business.

 

P

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I agree that film is a business (even the the most iconoclastic artist wants to pay their rent and fill their fridge)--and giving new artists a chance at bat doesn't replace the commercials, TV shows and features that keep average people employed at a decent wage. But even if the political will was there, it's unlikely that we could compete directly with Canada and the neighboring states for luring big productions. Voters on both sides would rather see more spending (or less cuts) in other areas.

 

In this particular state/market (and from my limited perspective) private and state grants to the arts really do help keep the local industry vital. New artists and experienced pros get to take a risk on innovative projects (which give experience to local crew, act as showpieces for post houses to draw bigger contracts, and increases exposure for the state's locations and infrastructure). The rebate program in my little corner of the world, as it now stands, doesn't really do much for anyone (especially with all the government foolishness related elsewhere).

 

I wouldn't advocate a socialized film industry, or completely repealing the commercial tax rebate, but a relatively small amount of money, supervised by working professionals in the industry, and granted based on merit seems like a reasonable way to *help* encourage the business of making films.

 

Phil, what's the model in the UK? I've seen some pretty nice films with the government stamp in the credits (and some bloated, pretentious stinkers as well). Do you think the problem is bureaucratic supervision, or that the money is spent on art-house type projects, rather than used to subsidize commercial production?

 

Ghandi on a Dune Buggy,

 

-Matt

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I find it hilarious (disturbingly so) that in our CONservative America where "government is a bad thing," that so many people are FOR taxpayer dollars going to fund private sector products. Tax "incentives" or outright subsidies (either way, it is revenue that a government is giving up) are bribes handed to a private sector business which results in absolutely ZERO profit-sharing on the back end. Can anyone name ANY other instance where an investor would just hand over cash to a business and not expect nor ask for any of the profit that comes of it?

 

This is an example of CONservative ideology which freely uses taxpayer cash to fund private sector products and receives ZERO in return. Sure, the Corporation pays taxes as do the temporary employees... but they were going to do that anyway regardless of these tax bribes/incentives/subsidies. Somehow, the idea of contributing to the betterment of society via taxes got perverted to mean that just offering a few jobs is the "cost" a business is willing to risk to operate in a city/state/territory/nation. Yes, a company SHOULD pay taxes anyway just for the privilege of operating wherever it operates. But as soon as the government hands over "incentives" or subsidies, the taxpayers have become defacto INVESTORS in that product and should see some profit-sharing from the gross profits. Does Canada do that? Do any States in the US do that? Hell no. This "incentive" thing is a racket to publicize the costs and privatize the profits no matter how much paint someone throws on it.

 

Real tax incentives should be applied toward products and services that truly enhance the public good, such as alternative energy. It's a difficult argument to make that the standard "Hollywood" movie is enhancing the public good enough to justify taxpayer investment in a product that they never see any profit-sharing from.

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Brian, if California had the money to fund a 40% film tax credit, which caused a massive boom back to the glory days of production levels, you'd be all in favour of it.

 

Your real gripe with tax credit schemes is that it drives film work out of California and into other jurisdictions. Yes, I have heard your argument 50 times.....people like me have bought houses here and live here, etc etc.

 

Not sure what the solution is for you Brian, the US has zero jurisdiction over foreign governments, and the US federal government can't even stop a US state from offering film tax credits. Let alone Canada.

 

R,

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Phil, what's the model in the UK?

Either you have to be a member of a fashionable minority group, or you have to be making a romantic comedy. The UK is still terribly class-based in many ways and if your name isn't Toby or Jemima you're not getting access to high end stuff either way. This accounts for the appalling pretentiousness of much UK stuff; it's upper-class rich kids being earnest about subjects they know nothing about.

I mean, if you think about it, The King's Speech pitches like the worst possible combination of historical costume epic and disability sob story; I'm astonished it's as good as it is (and it isn't as good as people make out - it's like Lost In Translation that way).

P

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Well Phil we all know the steps to winning an Academy Award:

 

Step 1) Make an incredibly good film.

 

Step 2) Pray the British don't make a costume drama. If they do, you're screwed.

 

R,

 

BTW, I want to enter my next film into the International Emmy Awards. Not sure I will bother paying the entry fee though. Looking over the previous years winners...all it says is BBC, BBC, BBC, BBC, BBC, BBC, BBC....and I'm not even joking!

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Brian, if California had the money to fund a 40% film tax credit, which caused a massive boom back to the glory days of production levels, you'd be all in favour of it.

 

Your real gripe with tax credit schemes is that it drives film work out of California and into other jurisdictions. Yes, I have heard your argument 50 times.....people like me have bought houses here and live here, etc etc.

 

Not sure what the solution is for you Brian, the US has zero jurisdiction over foreign governments, and the US federal government can't even stop a US state from offering film tax credits. Let alone Canada.

 

R,

 

 

They were called TARIFFS. Since George Washington, tariffs protected US manufacturing jobs. that is, until Reagan and his disciples took control of the world. "Incentives" are a race to the bottom for wages and quality of work. Tariffs are a disincentive for corporations in any nation to move their operation somewhere else.

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Brian, if California had the money to fund a 40% film tax credit, which caused a massive boom back to the glory days of production levels, you'd be all in favour of it.

 

Your real gripe with tax credit schemes is that it drives film work out of California and into other jurisdictions. Yes, I have heard your argument 50 times.....people like me have bought houses here and live here, etc etc.

 

Not sure what the solution is for you Brian, the US has zero jurisdiction over foreign governments, and the US federal government can't even stop a US state from offering film tax credits. Let alone Canada.

 

R,

 

 

They were called TARIFFS. Since George Washington, tariffs protected US manufacturing jobs. that is, until Reagan and his disciples took control of the world. "Incentives" are a race to the bottom for wages and quality of work. Tariffs are a disincentive for corporations in any nation to move their operation somewhere else.

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They were called TARIFFS. Since George Washington, tariffs protected US manufacturing jobs. that is, until Reagan and his disciples took control of the world. "Incentives" are a race to the bottom for wages and quality of work. Tariffs are a disincentive for corporations in any nation to move their operation somewhere else.

 

I see, I'm sorry to say but you take a very narrow minded view of the issue. You seem completely unaware that America is a trading nation, your country sells hundreds of billions of dollars worth of goods and services to foreign countries every year. Millions of American jobs are dependent on America's ability to access foreign markets.

 

If you want to impose tariffs to try and stop "run away" production, be prepared to see countries all over the globe retaliate with punitive trade sanctions of their own against the USA.

 

Good grief Brian Hollywood now earns 60% of their box office in markets outside of the USA!! How much foreign money is flowing into American bank accounts tonight as thousands of people all over the globe line up to see The Hunger Games? How many American jobs does that support?

 

Go ahead and build a trade wall around the USA and see what happens. How long will the USA last without access to Canada's vast natural resources. That is just the beginning.

 

R,

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Good grief Brian Hollywood now earns 60% of their box office in markets outside of the USA!! How much foreign money is flowing into American bank accounts tonight as thousands of people all over the globe line up to see The Hunger Games? How many American jobs does that support?

 

 

 

A couple hundred. Plus the profits aren't going to the rank & file. They got their reduced wages already and are looking for other things to work on, though it's hard because of the vast amount of production that flocks to "incentive" States and nations. The bulk of the profits don't filter down from the top 1% who will use their winnings to buy new mansions or the next Italian supercar.

 

Interesting that the world economy worked pretty well before this "globalization" scam was started. I'm pretty sure it'll work well once it collapses.

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Also, a "producer" can be anyone.

Also, that's not really the case, is it.

From what I've seen most of these incentives require a certain minimum spend (Which will be the high six or low seven figures), plus it will cost many, many thousands in accountancy fees to claim the rebate after the fact.

So, it really is only for people who are massively well-funded to begin with. As perhaps it should be: there's not much point in giving me 45% of my money back if I'm employing one person for a day.

P

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From what I've seen most of these incentives require a certain minimum spend (Which will be the high six or low seven figures), plus it will cost many, many thousands in accountancy fees to claim the rebate after the fact.

 

Well in Ontario anyone can claim the tax credits on any size budget. If your budget was $20, 000.00, then you are right, the pain of doing the filings will not make it worth it.

 

If your budget is 100K then it is certainly worth while. In fact, here in Canada productions under 200K are not even audited, so your micro movie saves a big chunk of money on accounting fees right there.

 

However, you are right Phil, many jurisdictions do require a minimum spend of 1M, that's true.

 

Also, you do need a near expert level of how the tax credits work in order to claim them. This is not a financial barrier though, it's an educational one. Anyone in Canada can sit down and study the 80 page guide on how the tax credits work, the government will give it to you for free.

 

Usually the complaining from filmmakers over not getting access to tax credits is solely as a result of their own personal laziness and unwillingness to learn. What is someone's excuse for not wanting to read?

 

R,

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  • 2 months later...

http://realfilmcareer.com/film-industry-safe-despite-tax-changes-studio-official-says/

 

 

 

My favorite line in the article is: “All it’s doing is reducing the total net savings for production companies,” Hariton said.

 

“I don’t think it’s a negative thing at all,” said Hariton of the removal of the sales tax exemption.

 

Um.... studios choose states to shoot in to AVOID paying taxes. I think this Hariton is trying to put lipstick on a pig. How long does Georgia have since no state can possibly continue handing out tax breaks forever? Tax "incentives" are NOT sustainable for anyone.

 

 

 

Film industry safe despite tax changes, studio official says

 

http://neighbornewspapers.com/bookmark/18967503-Film-industry-safe-despite-tax-changes-studio-official-says

 

by Savannah Weeks

 

A new state tax reform law removed a sales tax exemption on film productions, but Atlanta Film Studios partner Jeremy Hariton said he does not believe this will slow production companies from choosing Georgia or Paulding County as feature film or television show destinations.

 

The new law will go into effect July 1.

 

“All it’s doing is reducing the total net savings for production companies,” Hariton said. “Most states look to readjust incentive programs.”

 

These readjustments keep the incentive programs sustainable, according to Hariton.

 

Georgia’s Entertainment Industry Investment Act provides a 20 percent tax credit for companies that spend $500,000 or more on production and post-production in Georgia, either in a single production or on multiple productions, according to the state’s website.

 

An additional 10 percent credit is given if the finished product includes a state promotional logo.

 

“I don’t think it’s a negative thing at all,” said Hariton of the removal of the sales tax exemption. “It shows interest is still growing.”

 

Hariton said production companies want to know a program like Georgia’s is stable enough to make a commitment.

 

“Everyone feels really comfortable that changes are being made for the stability and longevity of the program,” he said.

 

The film studio partner evidently thought the program was stable, as Atlanta Film Studios opened in February.

 

“I think Paulding is right on the cusp of really exploding in the entertainment industry,” he said.

 

Hariton said the film studio will hopefully make Paulding County a place where production companies film the entire, or most of, a feature film or television show, instead of just a few scenes.

 

Filming in the county for the duration of the piece creates an opportunity for more business in the county, according to Hariton.

 

“If a show comes and stays at the studio for a few months, it makes a big difference,” he said.

 

Currently, a production company is using the studio, though Hariton said he could not reveal any details.

 

The company began using the studio in April and will be there until late July or early August, Hariton said.

 

Hariton said he is currently marketing the studio for both feature films and television shows.

 

The studio is being shown frequently to potential users, and there has been much interest but no other contracts signed, according to Hariton.

 

“We have a lot of interest,” said Hariton. “Having the first client sparks a lot of interest.”

 

Hariton said the studio did have time reserved for both feature film and television productions.

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no state can possibly continue handing out tax breaks forever? Tax "incentives" are NOT sustainable for anyone.

 

Still going strong here, and no sign of a reversal on tax credits in Ontario. Toronto on track to have another boom year.

 

I'm on track to shoot again this year, and tax credits make up a substantial part of my budget.

 

R,

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Still going strong here, and no sign of a reversal on tax credits in Ontario. Toronto on track to have another boom year.

 

I'm on track to shoot again this year, and tax credits make up a substantial part of my budget.

 

R,

 

 

I'm sure that Producers feel really good that they get off scot-free from contributing to the tax base that finances silly things like public infrastructure and education, making workers foot the entire bill.

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