Sunday, September 27, 2015 | Jackson Jambalaya
The Wall Street Journal published a column last week that said the movie-tax credit business was turning into a “B” rated blunder for states as the hoped-for benefits failed to materialize. Chris Hudson and Donald Bryson opined:
Lights, camera, tax credits! Apparently that’s how movies are shot in the 21st century. Hardly any major box office hit in recent years—from “Iron Man 3” to “The Hunger Games” to “Jurassic World”—made it to the silver screen without a hand from taxpayers. Yet negative reviews of these programs keep rolling in. North Carolina and Florida are examples that illustrate how difficult it is to let this corporate welfare fade to black.
Film tax incentives first took the stage in Louisiana in 1992. By 2009, 44 states and Puerto Rico had such programs. Film tax credits are expected to cost state taxpayers $1.8 billion this year, according to the Tax Foundation.
Many states offer refundable credits, say, for 20% of production costs. So when studios don’t owe taxes, they receive a cash payment. Other states, such as Georgia and Louisiana, even offer transferrable credits that studios can sell to another company—regardless of industry—seeking to lower its tax bill.
Proponents argue that film tax credits create well-paying jobs for local residents. Some even suggest that the incentives pay for themselves by boosting the economy and increasing government revenues. The Motion Picture Association of America claims: “Pure and simple: film and tax incentives create jobs, expand revenue pools and stimulate local economies.”
But real life is no Hollywood dream. Nearly every independent study has found that these arguments are more fiction than fact. The left-leaning Center on Budget and Policy Priorities put it best in a 2010 report: “State film subsidies are a wasteful, ineffective, and unfair instrument of economic development.”
No kidding. North Carolina and Florida, where we live, illustrate this reality. Mainly thanks to filming taking place in Wilmington, with its serene marshes, North Carolina began offering film tax credits in 2005. Lawmakers expanded the program in 2010 to cover 25% of a production’s cost up to $20 million, if the production spent at least $250,000 in the state. This cost taxpayers a high of $83.3 million in 2012.
A 2014 study by the North Carolina General Assembly’s Fiscal Research Division found that much of this money went down the drain: “For every dollar North Carolina allocates to the state film production credit it loses 54 cents.”
The jobs picture was bleaker. Looking at 2011, the Fiscal Research Division found $30 million in credits created 55 to 70 new jobs with a total payroll of $2 million. State taxpayers forked over between $429,000 and $545,000 a job, and these positions paid an average salary of $36,000 a year. It would be more sensible to give 100 unemployed people briefcases with $100,000 in cash.
After shelling out more than $200 million from 2012 to 2014, state lawmakers brought the program to a close at the end of last year, replacing it with a much smaller $10 million annual grant program. But earlier this month the Tar Heel state’s budget negotiators caved to film-industry demands for more cash. They agreed to triple the $10 million grant program to $30 million a year.
Fortunately, leaders in other states aren’t backing down. In 2010, Florida lawmakers enacted a $296 million film tax-incentive program to last through 2016. Several years in, though, all the funds were already allocated and the program was suspended. This summer, film-industry lobbyists blitzed Tallahassee for the third straight year seeking more funds.