State Movie Production Incentives
In 2002, five states offered movie production incentives (MPIs). By 2009, all but six states offered MPIs. (A couple additional programs may have been suspended for budgetary or procedural reasons.) MPIs offer movie makers (and often related industries, such as video game creators) various incentives to shoot their movie in a specific state. The signature incentive is a tax credit, which is often made even more attractive by being refundable or transferable. A refundable tax credit can result in a cash payment to the movie company (if the amount of the credit exceeds the tax owed). For a fee, brokers will sell transferable tax credits to companies that have tax liabilities in the state giving the tax credit. Three or four states (and D.C.) offer grants. Other incentives include sales tax exemption, lodging exemption, and fee-free locations. (Special Report, at 3-4.)
Not surprisingly, proponents and opponents disagree about the economic costs and benefits of a state providing MPIs. Proponents foresee movie makers hiring locals for a variety of jobs, eventually culminating in a ‘camera ready” local movie-making staff that an ever-increasing number of movie makers can hire in the future. Skeptics argue that the highly-paid staff (who can make over $1 million per movie) take most of their pay home to California or New York, after traveling from state to state to make movies, based on a “race to the bottom” in which states compete to offer the most/best incentives. In contrast, opponents argue that the local hirees are often short-term extras and lower-paid support staff. While the “traveling” elite movie-making staff does spend their per diem money at restaurants, stay at local hotels, and probably buys some local goods and services, (as mentioned) some state offer sales and lodging tax reductions or exemptions, as well.
Proponents argue that goodwill accrues from hosting a (major) movie production. Actors may praise the local site at promotional appearances for the movie, or send positive tweets. Georgia adds a 10% bonus to its incentive if the seal of the State of Georgia appears prominently in the movie, and Texas reserves the right to clawback incentives if a movie portrays Texas or Texans in a negative way. In theory, people attracted by the movie (including, possibly, out-of-state tourists according to one pro-MPI study) will spend (more) money, too. Thus, there is a classic (if somewhat controversial) “multiplier” effect from the MPI-induced money spent. (Movie folks eat at expensive restaurants, waiters get more money, waiters buy new tires for their cars, tire company hire more staff, etc.) [Movie industry saves the lives of the waiters’ families…] The discrepancy in dollar amounts can be extreme — Ernst & Young studies of the film credits asserted $1.50 in generated state and local revenue for each dollar spent on film tax credits in New Mexico and $1.90 per dollar spent in New York, whereas a 2008 study of the Massachusetts film credit(s) showed only 16 cents for every dollar spent. Independent studies of MPIs estimated that states had to offset 72-93 cents of every subsidy dollar with tax increases or service cuts, especially in the majority of states that have to operate on balanced budgets. (Tannenwald, pp. 5-6, 16)
The report listed many reasons why film subsidies don’t work, such as the overly generous nature of the subsidy & the need to continue offering them (to compete with other states); the creation of lucrative non-resident jobs, but temporary, low-paid in-state jobs; the possibility that the projects may have taken place without subsidies; and the aforementioned likelihood that the associated economic impact might be less than the MPIs that were given. In addition, the report listed three specific critique of the Ernst & Young methodology: exaggerated impact of tourism, double counting, and lack of transparency (Tannenwald, at p.11).
In a March, 2012 report on the film industry in Northeast Ohio & Ohio, Candi Clouse calculated a return on investment (ROI) of $1.20 for each dollar the state spent on the Ohio Motion Picture Tax Credit. She tallied a total of $34,339,647 ($10,032,021 in indirect benefits and $24,307,626 in induced benefits) versus $28,648,441 (credit value), assuming all of the projects would have been produced elsewhere, if not for the credit. (Clouse, at p. 28)
Steve Wells and Mark Ross. “One for the Money, Two for the Show…” An Update on State Tax Incentives for the Film Industry. 30 Journal of State Taxation 21 (July/Aug., 2013).
Steve Wells and Mark Ross. “One for the Money, Two for the Show…” Take Two. 30 Journal of State Taxation 33 (March/April 2013).
Incentive Spark Business. 53(8) SHOOT 18 (9/21/12).
Candi Clouse. Analysis and Economic Impact of the Film Industry in Northeast Ohio & Ohio. (March, 2012).
Demand for Ohio Film Credits Grow. Toledo Business Journal 8 (July, 2011).
Movie Production Incentives: Blockbuster Support for Lackluster Policy. (Tax Foundation, Special Report # 173, Jan., 2010).
Robert Tannenwald. State Film Subsidies: Not Much Bang for Too Many Bucks. (Center on Budget and Policy Priorities, Nov. 17, 2010).
Navjeet K Bal. A Report on the Massachusetts Film Industry Tax Incentives (Jan., 2011).
Navjeet K Bal. A Report on the Massachusetts Film Industry Tax Incentives (March, 2008).
Interactive State Maps (links to several such maps– the opening “map” just has a dollar bill imposed on the U.S. map)