The powerful Motion Picture Association of America came out with six-guns blazing last week, claiming that our new report on state tax subsidies for film and TV productions is “politically motivated” and “slipshod” and that the Center itself is “biased” and “prejudiced.” But when you get past all the name-calling, MPAA’s press release doesn’t address — let alone disprove — our main argument, which is that these subsidies aren’t a cost-effective way for states to generate jobs and income.
MPAA asserts that the number of films shot in Massachusetts increased sharply after the state started subsidizing them. But that’s not the whole story. As our report explains, Massachusetts also conducted the most thorough, independent study of a film tax subsidy to date, and that study found that the subsidy’s cost far outweighed its benefits:
Massachusetts lost $88,000 in tax revenue for every new job created by the Commonwealth’s film tax credit and filled by a Massachusetts resident.
Every dollar of state tax revenue lost because of the film tax credit generated less than 69 cents in income for the Commonwealth’s residents.
For every dollar of film tax credits awarded to film producers, the Commonwealth gained only $0.16 in revenue, mostly in the form of income tax revenues withheld from film company employees. The remaining $0.84 had to be financed by higher taxes elsewhere or cuts in public services. Independent studies of film subsidies in other states have estimated similar financial costs, ranging from $0.72 to $0.93 per awarded subsidy dollar.
The tax increases and cuts in services that states have to impose to pay for film subsidies take income and jobs out of the state’s economy, negating whatever small positive economic impact the subsidies may get by attracting new productions. States would be better off eliminating these wasteful tax breaks and using the freed-up revenue to maintain vital public services and pursue development strategies that may be less glamorous but are more cost-effective, such as investment in education, job training, and infrastructure.