Tax credits a long running issue and one that needs an entire review. Really the who tax system needs a review, but that is unlikely.
Moving on to the current issue that will ruin Nova Scotia. The film tax credit.
Suggested numbers are that the government hands out $22 million in tax credits to the film industry (Source: A facebook post) and the resulting output is $100 million (ish)(Source: Still a facebook post). Now assuming these numbers are correct, lets break a few things down.
From that $100 million lets assume that $70 million goes to wages and $30 million to other expenses. From the $70 million lets assume a 50/50 split between Nova Scotia workers and out of province help. This leaves us $35 million in wages being kept in Nova Scotia and the remaining goes elsewhere. Of those wages the Government of Nova Scotia would see $2,800,000. Now assuming all of the people working here spend 10% of their income here while working, we are looking at $7 million and of that $560,000 would remain in sales tax. Of the other $30 million we raised earlier we can expect that all of that money remains here. I’ll make the assumption that 30% of that impacts wages ($9,000,000) and from that the gov’t would see $720,000. On the remaining $21,000,000 we’d likely see $1,680,000 in tax revenue collected form sales taxes.
Now on a $22,000,000 investment (based on my crude math), the government gets a $5,760,000 return. Effectively losing $16,240,000 in the year that the above tax credits were issued.
If this is the case I can see why the tax credits are being questioned. And lets be clear here, these are not payroll rebates, these are potential tax credits that fund up to 65% of someones wage. That is not sustainable and it shouldn’t be. A 3 – 5% payroll rebate over a decade is one thing. A tax credit that forks out up to 65% is insane.
Just my 2 cents.
At the end of the day Nova Scotia’s politicians need to start making tough decisions if this province is going to become economically great. Bending over every time someone screams is not helping. It could be the film industry or health care, at some point the popular decision (the one done for a vote) needs to be shelved for the right decision.