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State Film Credits Redux

January 20, 2011 at 9:59 PM
BY
CBPP

In a story today on tax credits that nearly every state has created for film and TV production, the New York Times cites our study that criticized the credits as costly and inefficient.  The article also quotes the Motion Picture Association of America’s labeling of our study as “slipshod.”  In case you were wondering, here’s what Robert Tannenwald, a Center senior fellow who wrote our study and a former Vice President of the Federal Reserve Bank of Boston, wrote on our blog when the MPAA originally leveled its charge:

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.…  Read the full post here.

Last week, Mr. Tannenwald updated us with the following blog:

Monday’s proposal from Susana Martinez, New Mexico’s newly elected Republican governor, to cut the state’s tax credit for film and TV productions by 40 percent is a smart move.  It’s also noteworthy because New Mexico started the wave of these state subsidies that has swept the nation over the past decade.  As I explained in an earlier report, those subsidies — which more than 40 states now offer — create too few good jobs for state residents at much too large an expense to state taxpayers, especially at a time of large budget shortfalls.

New Mexico’s film tax credit cost the state $67 million in fiscal year 2010, siphoning away funds from important public services, including education, public safety, health care, and infrastructure.

In related news, the Massachusetts Department of Revenue released its annual update of the most thorough study to date of a state’s film tax subsidy.  It shows that the state’s subsidy is even more wasteful than previously thought.  The report shows that:

  • In 2009, the cost to Massachusetts for every full-time equivalent job filled by a resident and created by its film tax subsidy was $325,000.
  • For every dollar of film subsidy that the state doled out in 2009, it received only 13 cents in return in revenues generated by economic activity that the subsidy induced.

State policymakers looking to close the continuing gap between weak revenues and rising needs should follow Governor Martinez’s example and limit — or, better yet, eliminate — these inefficient subsidies.