Advocate staff file photo by BILL FEIG -- Patrick Mulhearn, executive director at Celtic Studios

The incentives Louisiana designed to draw the film industry have succeeded wildly, but the state might be able to generate an even greater economic impact by allowing the tax credits to offset the taxes on oil and gas production or other taxes, said Patrick Mulhearn, executive director at Celtic Studios in Baton Rouge.

“Why not make motion picture tax credits applicable to oil and gas severance tax liabilities? It would make sense to have an existing Louisiana industry supporting a burgeoning one, and vice versa,” Mulhearn said.

Right now, the 30 percent tax credits are applicable only to income taxes, so the state law would have to be changed, Mulhearn said. Making that change would allow the credits to be applied to “a different pot of liabilities,” including the severance taxes paid on oil and gas or timber, he said.

Mulhearn was the guest speaker at the Baton Rouge Press Club weekly luncheon.

Louisiana provides an income tax credit for 30 percent of film production costs and 5 percent of payroll costs. Those generous incentives allowed Louisiana to lead the nation in feature-film production in 2013.

But the program also has drawn criticism. A report by the state Legislative Auditor’s Office found that Louisiana paid out $800 million in tax credits from 2008-12, far more than the state reaped in tax revenue as a result. Over the same period, the state gave up around $3 billion in taxes to encourage companies to move to Louisiana or to stay here.

Mulhearn said the motion picture tax credit is just one piece of the state’s tax puzzle. There are a number of exemptions and exclusions, including sales tax holidays.

The state Legislature and Department of Revenue need to figure out which incentives make the most sense for Louisiana and what approach will give the state the best return on investment.

It’s important to make sure the state’s film industry remains strong, Mulhearn said. The industry has helped Louisiana in a number of ways, including:

Diversifying the state’s economy and helping reverse the brain drain. The film industry generated $730 million in household earnings in 2012. The average film job pays $51,000 a year.

Increasing tourism exposure. Greater film and television activity is drawing more people to the state. “You can’t put a price tag on that exposure,” he said.

Helping to reveal “the shale” of talented Louisiana residents that lies just below the surface. Writers, directors and stars are here now. Louisiana just needs to put more into developing, refining and distributing that talent.

Mulhearn said there are always improvements that can be made to the motion picture tax credit program. But, he added, Louisiana has to make sure it doesn’t put itself at a competitive disadvantage to its main competitor, Georgia. As long as the tax credit program is seen as stable, Louisiana will continue to draw film and television projects.

Follow Ted Griggs on Twitter, @tedgriggsbr.