Daily Austerity Watch: Liberals, Conservatives Agree That Film Tax Credits Are A Bad Idea

The liberal Center for Budget and Policy Priorities (CBPP) and the conservative Tax Foundation, who rarely agree on anything, are unanimous in their view that governments should not be in the business of subsidizing movie and TV production.  States are getting the message.

Credits to encourage companies to film shows in a particular location are starting to dry up as financial pressures on the states continues.   These incentives are among the most ubiquitous and generous offered to industry by governments.  They also are costly.  In fact, Kansas suspended its credits in 2009 and 2010 because the state could not afford them. New Jersey’s program was suspended for the 2011 fiscal year. New Mexico capped its program and Rhode Island recently ended its incentive.

“As we have said before film tax credits are bad policy and can’t deliver on their exaggerated promises,” wrote Tax Foundation economist Mark Robyn in a blog post last month. “States are locked in an unending arms race of incentives with the real beneficiaries being the film companies.”

Michigan, which offered subsidies of as much as 42% of production costs, eliminated its credit under the tax reform bill enacted last week by the state Legislature.   Budget negotiations are still ongoing, however, so it is not dead.   State Sen. Mike Kowall, a Republican, has introduced a bill that would “reinvent” the credit and give the state more control over how which producers receive it, according to State News.com.  Michigan’s tax break is one of the most generous in the country and has attracted Disney’s planned prequal to the “Wizzard of Oz”, which is reportedly receiving $40 million in tax rebates from the cash-strapped state.

.Lawmakers in Alaska are reportedly having doubts about extending that state’s film credit.    Connecticut’s newly enacted budget contains restrictions on that state’s program, which may make the state less attractive to Hollywood, according to media reports.     An effort to pass a credit failed to pass the state Legislature in Hawaii.    The incentive, however, does have its fans such as Pennsylvania Gov.  Tom Corbett (R) who spared his state’s credit while sparing little else in his budget proposal, which one think tank called “wasteful.”

As of 2010, 43 states offered these deals versus a handful in 2002.  CPBB pegs their cost as of the FY 2010 at $1.5 billion.  Producers argue that they bring bring states money and jobs.   According to the Motion Picture Association of America, television and movie production supported 2.4 million jobs which generated $140 billion in total wages in 2008.  Nearly 40% of those jobs are located outside of New York and California. Critics say the economic impact of film and TV production often is exaggerated.

“Film subsidies fail to produce promised benefits in large part because film makers usually give the
best jobs to scarce, highly paid talent brought in from other states,” according to a 2010 CBPP report. “Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work that is unlikely to build the foundations of strong economic development in the long-term.”

Too bad that liberals and conservatives don’t agree on more things with the same enthusiasm that they do for Hollywood tax credits being a bad idea.

–Jonathan Berr