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Why State Film Subsidies Get Two Thumbs Down

November 17, 2010 at 2:15 PM

Before releasing one of his movies, Mel Brooks gathered his cast and crew to thank them for their hard work.  When asked how he thought the film would do, he quipped, “This movie will make millions.…  Unfortunately, it cost millions.”

The same is true of the tax subsidies for film and TV productions that nearly every state has adopted in recent years in an effort to boost jobs and incomes, as I explain in a report released today.

These subsidies are quite lucrative to producers — and costly to states.  Forty-three states spent $1.5 billion on them in fiscal year 2010, as much as the salaries of tens of thousands of teachers and police officers.  The median state gives producers a credit worth 25 cents per dollar of subsidized expense.  In some states, if the credit exceeds the producer’s tax liability, the state will write the producer a check for the difference; other states allow producers to sell their credits to other companies that owe taxes to the state, like banks and insurance companies.

And what do states get in return?  Not much:

  • The best-paying jobs that film and TV productions generate go to non-residents. Residents tend to get temporary, part-time work that disappears once the producers leave town
  • Contrary to claims by film and tourism agencies, the subsidies don’t come close to paying for themselves — a Massachusetts study found that the state gained only 16 cents in revenue for every dollar of film tax credits awarded, for example.   Thus, the subsidies deprive states of revenue that would otherwise help fund public services for residents. These services— like education, public safety, healthcare, and infrastructure—keep state economies vibrant and competitive.
  • States have no way of limiting subsidies only to productions that otherwise wouldn’t have come to their state, so at least part of the money ends up rewarding producers for something  they would have done anyway.

With states facing more than $130 billion in shortfalls next year resulting from weak revenues and shrinking federal assistance, costly tax giveaways like these aren’t worth a few celebrity sightings.