The Oregon Center for Public Policy today asked the Oregon Secretary of State to audit and investigate a tax credit program that subsidizes film productions, claiming that the “unnecessarily generous” tax credits are “squandering state resources that could fund schools, public safety and health care and other human services.”

The program in question gives a tax credit worth $100 for every $90 contributed to the Oregon Production Investment Fund. That means that the state suffers a net loss of $10 and the contributor gets a guaranteed 11 percent return on investment at taxpayers’ expense, according to OCPP.

The Oregon Film and Video Office, the agency in charge of administering the tax credit, sells the credits at the price most generous for the purchaser allowed under the law. The tax credit finances the Production Investment Fund, which in turn subsidizes movies such as the one starring Harrison Ford currently being filmed in Oregon.

OCPP’s letter (PDF) noted that the tax credits are sold out through 2011, which it attributed to the fact that “the current tax credit is so advantageous to the purchasers.”

The agency’s failure to reduce the size of the tax credit despite its authority to do so breaches its legal responsibility to maximize state revenues, OCPP charged. The Silverton-based think tank said that if the film office offered a less generous credit the Production Investment Fund would have more money to subsidize filmmaking.

“By maintaining overly generous rules, the Office is failing to meet the requirement that it maximize state revenues,” wrote OCPP executive director Chuck Sheketoff in his letter to Secretary of State Kate Brown. “The level set for the tax credit unnecessarily benefits some of Oregon’s wealthiest households, squandering state resources that could fund schools, public safety and health care and other human services.”

Oregon Department of Revenue data analyzed by OCPP shows that nearly three-quarters of the tax benefits from the program go to the highest-income 1 percent of households, who represent about 22 percent of the households that use the tax credit. The OCPP analysis also shows that the top 5 percent of households, representing about 62 percent of claimants, reaped about 94 percent of the credit’s value.

“This tax credit program is enriching the very rich, not the typical Oregonian,” said Sheketoff. OCPP’s analysis shows that a majority of Oregon households, low- and middle-income households that comprise the bottom 60 percent of households, represented just 8 percent of claimants and reaped only 0.5 percent (one-half of 1 percent) of the credit’s value.

To show how generous the tax credit is, the research institute’s letter cited the examples of Mark and Greg Goodman, each of whom contributed more than $427,000 to the film investment fund in 2008 and obtained tax credits in return for over $475,000 — a $47,000 profit for each of them.

OCPP pointed out that “the profits each of the Goodmans realized from their one transaction with the state that one year were more than the annual income earned by about half of all Oregon households that same year.”

“The Goodmans did nothing wrong. They simply accepted the overly generous deal offered by the State,” OCPP noted.

For now, the tax credit program is limited to $5 million in total credits per year. A bill pending before the legislature, SB 621, would increase the credit by 50 percent to $15 million a biennium.

While urging the Secretary of State to audit and investigate the administration of the tax subsidy program, OCPP’s letter questioned the wisdom of establishing what it called a “rob-Peter-to-pay-Paul” tax credit program that finances film productions by taking General Fund dollars from schools and other key programs.

“[U]ntil the Legislative Assembly terminates the rob-Peter-to-pay-Paul scheme,” wrote Sheketoff, “at a minimum the tax credit should not be so generous that it unnecessarily enriches the wealthiest Oregonians at the expense of public services, in violation of state law.”