State Film Subsidies: Not Much Bang For Too Many Bucks
End Notes
[1] These are subsidies that offset corporate or individual income taxes that producers would otherwise have to pay. The seven states without such film subsidies are Delaware, Nebraska, Nevada, New Hampshire, North Dakota, South Dakota, and Vermont. Kansas’, Iowa’s, and New Jersey’s film tax credits have been suspended; they could be reinstated in the future. In August of this year, Iowa permitted taxpayers to claim film tax credits earned before the credit had been suspended. See http://www.njfilm.org/incentives.htm; Rod Boshart, “Film tax credits resume in Iowa,” Lee-Gazette Des Moines Bureau, August 27, 2010, http://wcfcourier.com/news/local/govt-and-politics/article_f7621b60-b228-11df-b9ea-001cc4c002e0.html ; “Entertainment, Media and Communications Tax Newsletter,” PricewaterhouseCoopers, March 2010, http://www.publications.pwc.com/DisplayFile.aspx?Attachmentid=3166&Mailinstanceid=15588 . Some other states offer film producers less lucrative subsidies, consisting of exemptions from sales taxes and/or taxes on lodging.
[2] Based on salaries reported in the U.S. Bureau of Labor Statistics’ May 2009 National Occupational Employment and Wage Estimates, http://www.bls.gov/oes/current/oes_nat.htm#33-0000. The mean annual salary for each of these occupations was divided into $1.26 billion, which is 84 percent of $1.5 billion, on the assumption that states offering film subsidies get back 16 cents in tax revenues on the subsidy dollar. These tax revenues are generated by the economic activity stimulated by film tax credits. See page 5 of this report for further discussion.
[3] For an overview of Canadian federal and provincial film production subsidies, see the websites “Canada Film Capital,” http://www.canadafilmcapital.com/taxcredit/index.html, and “Canadian Heritage,” http://www.pch.gc.ca/pgm/em-cr/evaltn/2008/prt3-eng.cfm.
[4] Susan Christopherson and Ned Rightor, “The Creative Economy As ‘Big Business’: Evaluating State Strategies to Lure Filmmakers,”Journal of Planning Education and Research, December 21, 2009, pp. 3-5, http://www.aap.cornell.edu/crp/upload/FilmBigBiz.pdf.
[5] Massachusetts is an exception; it offers film producers a choice of either transferability or a refund equal to 90 percent of film tax credits awarded. See http://www.mafilm.org/mass-film-tax-credit-law-in-a-nutshell.
[6] Navjeet K. Bal, “A Report on the Massachusetts Film Tax Incentives,” Commonwealth of Massachusetts, Department of Revenue, July 2009, http://www.mass.gov/Ador/docs/dor/News/2009FilmIncentiveReport.pdf , p. 21; Shelley Geballe, “Fiddling While Rome Burns: Connecticut’s Multi-Mullion Dollar, Money Losing Subsidy to the Entertainment Industry,” Connecticut Voices for Children, June 2009, Appendix B, http://www.ctkidslink.org/publications/bud09filmtax.pdf.
[7] Geballe, Appendix B.
[8] Bal, p. 20.
[9] Nicole Gates Anderson, “A Cliffhanger for New York’s Film Industry,” Gotham Gazette, May 4, 2009, http://www.gothamgazette.com/article/fea/20090504/202/2902. States impose a variety of conditions on eligibility for film subsidies designed to limit their cost and/or steer production outlays to residents of the sponsoring state. As the next section of this paper shows, however, even with these conditions, film subsidies do not create jobs and income for residents of host states in a cost-effective manner.
[10] http://www.louisianaentertainment.gov/film/films_by_year.cfm ; http://www.imdb.com/title/tt0350232.
[11] “Louisiana Motion Picture, Sound Recording and Digital Media Industries, Prepared for State of Louisiana, Louisiana Economic Development, Baton Rouge, Louisiana,” Economic Research Associates, February 2009, pp. 87-89, http://www.louisianaentertainment.gov/film/files/(ERA%20report)pdf..
[12] Bal, p. 7.
[13] Darcy Rollins Saas, “Hollywood East? Film Tax Credits in New England,” New England Public Policy Center at the Federal Reserve Bank of Boston, October 2006, pp. 2-3, http://www.bos.frb.org/economic/neppc/briefs/2006/briefs063.pdf.
[14] Given the shaky state of today’s economy, the temporary, part-time jobs created by film production might seem better than nothing. However, film tax credits are meant not to be a countercyclical tool but rather an instrument of economic development, improving residents’ prospects for stable work and income.
[15] Bal, p. 17.
[16] Cathy Greenhalgh, “Traveling Images, Lives on Location: Cinematographers in the Film Industry,” in Verid Amit, ed., Going First Class? New Approaches to Privileged Travel and Movement, Berghahn Books (New York: 2007), p. 74.
[17] During this three-year period, 41 percent of total payroll for all credit-eligible feature films went to just 36 non-resident employees, each of whom received more than $1 million in salary per production. Author’s calculations and Bal, pp. 13, 17-19.
[18] Geballe, p. 2.
[19] “Motion Picture Production Tax Credit Program: Annual Report, Calendar Year 2008,” Arizona Department of Commerce, March 18, 2009, p. 9, http://www.azcommerce.com/doclib/finance/mopic%20annual%20report%20cy%202008%20final.pdf .
[20] Author’s calculations and Steven R. Miller and Abdul Abdulkadri, The Economic Impact of Michigan’s Motion Picture Production Industry and the Michigan Motion Picture Production Credit, Center for Economic Analysis, Michigan State University, February 6, 2009, Table 2, p. 6, http://www.michigan.gov/documents/filmoffice/MSU_Economic_Impact_Study_269263_7.pdf.
[21] Katherine Gregg, “Hollywood is here, but is price too high For State?” The Providence Journal, March 3, 2008, http://www.projo.com/news/content/film_credits_02_03-02-08_LM957VT_v77.365ac0a.html .
[22] “ ‘[Michigan’s film tax credit] gave my boys some overtime that they were happy to get,’ said Frank Rymill, co-owner of DeSantis trucking in Warren,” in Tim Martin, “Film Tax Credit Draws Mixed Reviews”, Lansing State Journal, April 7, 2010.
[23] Bal, p. 8.
[24] Michigan State University, Motion Picture Credit, p. 7.
[25] Bal, pp. 9-10.
[26] Vermont is the only state lacking such a requirement.
[27] See Iris J. Lav and Robert Tannenwald, “The Zero-Sum Game: States Cannot Stimulate Their Economies by Cutting Taxes,” Center on Budget and Policy Priorities, March 2, 2010, https://www.cbpp.org/cms/index.cfm?fa=view&id=3100.
[28] Christopherson and Rightor, pp. 10-11.
[29] Christopherson and Rightor, pp. 3-4.
[30] Kerry A. Chase, “Theater of Conflict: Commerce, Culture and Competition in the Global Entertainment Industry,” http://people.brandeis.edu/~chase/research/theater.pdf.
[31] Sharon Silke Carty, “Michigan tax credit courts film industry to lure money, jobs,” USA Today, August 17, 2009, http://www.usatoday.com/money/media/2009-08-16-michigan-movies_N.htm.
[32] David Romero, “Albuquerque Studios files Chapter 11 After many months of financial troubles,” July 21, 2010, http://www.krqe.com/dpp/news/business/albuquerque-studios-files-chapter-11.
[33] Jack Egan, “Louisiana film biz hit with Controversy,” Variety, September 10, 2009, http://www.variety.com/article/VR1118008413?refCatId=3722.
[34] See Elizabeth McNichol, Phil Oliff and Nicholas Johnson, “States Continue to Feel Recession’s Impact,” Center on Budget and Policy Priorities, October 7, 2010, https://www.cbpp.org/cms/index.cfm?fa=view&id=711.
[35] Kansas Department of Revenue, http://www.ksrevenue.org/taxcredits-film.htm. Also see footnote 2.
[36] Lee Rood, “80% of Iowa film program tax credits were flawed, audit finds,” Des Moines Register, October 27, www.desmoinesregister.com.
[37] “State Film Incentives,” Screen Actors Guild, http://www.sag.org/state-film-incentives.
[38] Ernst & Young also did a study for New York State on the impact of its film tax credits (reported in Table 3). The study was commissioned by the New York State Governor’s Office of Motion Picture and Television Development and the Motion Picture Association of America. See “Estimated Impacts of the New York State Film Credit: Prepared for the New York State Governors Office of Motion Picture and Television Development and the Motion Picture Association of America,” Ernst & Young, February 2009, http://www.southwindsor.org/pages/swindsorct_IT/New%20York%20Ernst%20%26%20Young%20State%20Film%20Credit%20Study.pdf .
[39] “Economic and Fiscal Impacts of the New Mexico Film Production Tax Credit: Prepared for the New Mexico State Film Office and State Investment Council,” Ernst & Young, January 2009, http://www.nmfilm.com/locals/downloads/nmfilmCreditImpactAnalysis.pdf .
[40] “Economic and Fiscal Impacts of the New Mexico Film Production Tax Credit: Prepared for the New Mexico State Film Office and State Investment Council,” p. i.
[41] Anthony V. Popp and James Peach, “The Film Industry in New Mexico and The Provision of Tax Incentives: A Report Submitted to the Legislative Finance Committee of the State of New Mexico,” Arrowhead Center, August 26, 2008, http://www.nmlegis.gov/lcs/lfc/lfcdocs/film%20credit%20study%20TP&JP_08.pdf .
[42] “Economic and Fiscal Impacts of the New Mexico Film Production Tax Credit: Prepared for the New Mexico State Film Office and State Investment Council,” pp. 9-11.
[43] Chief Economist Francis also expressed concern that the respondents to the survey were unrepresentative, much more likely than New Mexico tourists as a whole to have traveled to the state to visit sites they saw in a film. Memo from Norton Francis, Chief Economist, State of New Mexico Legislative Finance Committee, to Senator John Arthur Smith, Chair, SFC and Representative, Luciano “Lucky” Variella, Vice Chair, HAFC, “RE: Ernst and Young Film Study: REVISED,” March 7, 2009, pp. 5-6.
[44] Ernst & Young did not indicate why this spending, over one-fifth of the total, failed to qualify for the subsidy.
[45] Chief Economist Francis made a similar point in his memo to the New Mexico Legislative Finance Committee of March 7, 2009. See Francis Memo, p. 4.