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  • Hober Short 10:29 am on 23 March 2012 Permalink | Reply  

    WRAL has an article about North Carolina’s tax program to incentivize/bribe movie companies to film in NC that fleshes out the details of the program, and it’s pretty bad. In short, movie companies get a refundable tax credit equal to 25% of all “qualified” spending in North Carolina. What “qualifies”? Well, the article lists that only the first million of salary per actor or director counts as North Carolina spending, despite it not really being clear how those salaries boost the local economy.

    And did you see the business about how the tax credit is refundable? The article has full details, but in the past three years we have numbers for, more than half of the tax “credits” ended up being refunded.

    Looking at the numbers, this is a relatively accurate scenario: a movie spends $100mil in NC, of which $70mil is “qualifying”. They would pay ~10% tax on their expenditures (no idea what taxes and for what), so they owe $10mil in taxes. But NC gives them a refundable tax credit for $70mil * .25, or $17.5mil. So instead of NC collecting $10mil in taxes, they write the movie company a check for $7.5 million taxpayer dollars.

    That’s a heck of an expensive jobs program.

    • Bartholomew Xerxes Ogilvie, Jr. 11:47 am on 26 March 2012 Permalink | Reply

      I was kinda wondering about this the other day. When I heard that “The Hunger Games” was raking in mountains of money, my first thought was “wouldn’t it be nice if that translated to some kind of economic benefit for North Carolina?” But then I realized that it might well be a net expense.

      Except for the local businesses that get to sell coffee and lunch to the film crews, I’m not sure having these movies shot in our state is worth anything except bragging rights.

  • Hober Short 10:50 am on 7 March 2012 Permalink | Reply  

    I just finished reading Too Big To Fail, which is basically a fly-on-the-wall chronicle of the entire process during 2008 of the five largest investment banks scrambling to survive and the flurry of activity in the government to prop them up. It’s a long book, but probably one of the more important reads of my life, but I have a few points I disagree with.

    • The book makes the ubiquitous point that the US taxpayers got paid back with interest on some of these bailouts. Of course, since we were borrowing the money, I wonder whether the interest from the banks is enough to offset the interest we had to pay on our loans. And the Hayekian argument: it’s impossible to know what could have been done with the money tied up in the banks, especially at a time of a “credit crunch” where small businesses couldn’t get loans and people couldn’t get mortgages.

      In other words, if the government hadn’t taken those loanable funds to give to the American banks, those people and businesses may have been able to get the loans they needed to expand and refinance, instead of stagnating.

    • Virtually the entire book, the Feds (Fed Chairman Bernanke, TreasurySec Paulson, et al.) are running around trying to “save” banks and the financial system from collapse. Except for the last fifty pages when the book delves in to the sausage factory that was the creation of TARP, they are doing this by taking these banks that are too large to be allowed to fail and bribing larger banks to buy them, creating even bigger banks.
    • It was galling to watch Bernanke, Paulson, and Geithner (now Paulson’s replacement as TreasurySec) conspire to force strong banks to take the TARP bailout even if they didn’t need it, so that accepting TARP funds wouldn’t be perceived by the market as weakness. I’m amazed that people can call for more regulation when the regulators willfully hatch a plot to lie the market and the American people in order to conceal which banks are financially unstable. Speechless.
  • Hober Short 1:33 pm on 6 March 2012 Permalink | Reply  

    This week’s Econtalk is an excellent layman’s discussion of the concrete mechanics that contributed to the credit crunch and financial crisis of 2008. One of the amazing parts comes about 50 minutes in when they discuss how FDIC insurance (“Deposits guaranteed up to $100,000”) disincentivizes depositors to keep an eye on the health of their bank, because one way or another they’ll get their money.

    This, they say, means that where in times past, highly leveraged (i.e. fragile) banks would have to pay people more to loan them money (i.e. deposit in their bank) because their high leverage made people suspicious that the bank would fail. But with FDIC insurance, people don’t care, and banks can jack their leverage ratios (all these terms are explained in the podcast) sky high. That works fine until they discover that they don’t have enough money to cover their debts, because their margin for error wasn’t big enough to absorb the plummet in value of mortgage-backed securities.

    Seriously, listen to it. You’ll learn something.

    • Pat 2:10 am on 8 March 2012 Permalink | Reply

      I added Econtalk to my Podcaster feed and started listening to the episode you’re talking about. And a very strange thing happened. The subject matter is very dry and abstract, full of technical terms that only finance experts would use (although, as you say, they’re all explained). This sort of thing always makes my eyes glaze over. I should be bored silly. But, inexplicably, that hasn’t happened. I’m about 70% of the way through the episode and it’s still holding my interest. I’m understanding a lot of it, and you’re right, I’m learning quite a bit. I have no explanation for this.

      • Hober Short 11:52 am on 8 March 2012 Permalink | Reply

        The episodes aren’t always this good… Sometimes they are arcane and impenetrable, or just boring. But then other times the guest being interviewed is interesting and articulate and you get good stuff like this.

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