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There’s a new sequel coming out, and let me tell you, it is terrible.
No, I’m not talking about whatever film is actually up on the silver screen at the moment, but a push in statehouses across the country to revive or create film and TV tax credit programs, one of the worst misuses of public funds around. We all need to be giving this latest episode of economic policymaking a big thumbs down.
From what I’ve seen recently, and please flag if I missed anything, West Virginia already reinstated its program, which expired in 2018, and lawmakers in Michigan are attempting to do the same to a program that was repealed in 2015. Statehouse members in Arizona and Indiana are trying to get their states into the film credit game for the first time, while Washington State recently expanded its program, and other states, including Illinois and Rhode Island, are looking to do the same.
But the key scene in this week’s story is the introduction of a bill in Georgia that would have capped that state’s massive film tax credit program, which cost $1.2 billion last year, at $900 million annually. (Still a lot, to be clear!) To understand why the call for a cap is interesting, I need to go through a little history.
In 1992, Louisiana created the first tax credit for film production in the country, which it expanded dramatically in 2002. For a time, the move paid dividends, as major film studio after major film studio moved production to the Bayou State. In fact, in 2013, more English-language films were made in Louisiana than anywhere else in the U.S.
Inevitably, other states couldn’t resist the temptation to try the same thing, so they piled in after Louisiana. By 2010, 44 states, the District of Columbia, and Puerto Rico all had film tax credit programs, offering back to major movie producers such as Disney and Paramount up to 40 percent of the costs they incur filming in a particular place.
Many states also allowed these tax credits to be sold to third parties, and since most film productions have little to no tax liability in the location where they’re actually filming, thriving secondary markets in film credits popped up, with everyone from major insurance companies to Oprah scooping them up for cash in order to reduce their own tax bills.
Of course, all this public money sloshing around created an intense bidding war for what is, at the end of the day, a finite amount of filmmaking that can happen in any given year. Later entrants ended up paying more to poach productions from other states and put pressure on early adopters like Louisiana to spend more to keep up. State and local film development offices, in order to justify their own existences, kept pushing for higher levels of spending with more generous terms for film producers.
Eventually, Louisiana alone was doling out hundreds of millions of dollars in film tax credits every year just to maintain the monster it had created, even as public universities there were planning for insolvency. In 2017, Louisiana finally capped its program — allowing the aforementioned Georgia to seize the mantle of America’s new Hollywood, where a similar cap at least came up for discussion this month before ultimately being defeated.
I certainly wouldn’t be shocked if history repeated itself fully, with Georgia eventually capping its program and some other state seizing the moment to poach the Peach State’s movie business, starting the cycle all over again … again.
Why do I say these programs are such a poor investment? Well, loads of independent analyses shows that film tax credits pay pennies on the dollar to taxpayers and don’t create good, sustainable local jobs. And when I say pennies, I mean it: A 2018 survey of studies by economist J.C. Bradbury found that film tax credits return an average of only 27 cents per dollar invested.
You can read these pieces if you’d like a deeper rundown of why the economics of these things are so bad, but the short version is states ultimately can’t win a bidding war for what is, at the end of the day, an industry that is very transient and full of short-term positions.
Between 2009 and 2018 things were actually trending in the right direction, with 13 states abolishing their film tax credit programs. We’re down to 32 states with programs currently, from that previous high of 44. Alas, things are headed back the other way, I think in part because Georgia constantly gets a ton of good — and as this other study by Bradbury shows, thoroughly undeserved — press all across the country for spending so much public money on film production.
But the hype and glitz and glam can’t cover up the truth: Film tax credits are a scam and states approving new handouts are going to be disappointed by the results, just like every other state that came before.
This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on April 13, 2022.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.
