A recently released study – just another in a long line from parties on both sides of the debate – shows little to no economic gain for states with tax credit programs for the film industry. This one comes from the well-regarded USC Price School of Public Policy – ironically, a university with a large film school in a state that just enacted one of the largest increases in film tax incentives in history.
Nothing. For every economic study claiming no benefit there is another claiming huge gains. Economists can find pretty much anything they want in the data, so the production industry should take the studies with a grain of salt. We’ll leave the debate to the dismal scientists but there are a few good takeaways when producers examine the long-term viability of state incentive programs.
Investment, durability matter most. Studies find what we see with our own eyes. When credit programs encourage investment in physical infrastructure through long-term, legislative certainty the industry flourishes regardless of what you believe about economic benefit and subsidization.
Transferrable beats refundable. Transferrable credits are less attractive to producers because of the loss on sale, but they are safer in terms of longevity when lawmakers start reviewing programs. They are easier to defend when someone is actually paying taxes and less prone to abuse.
What’s the impact:
Negative studies provide fodder to politicians who are looking to kill programs for budget or ideological reasons and played a part in the loss or reduction of programs in North Carolina and Michigan.
Hollywood is easy to target but once local money is involved it gets harder to roll back tax credit programs. Programs like those in New York and Georgia have encouraged billions of dollars in physical infrastructure, encouraged colleges and universities to invest in curriculum, and are showing tourism benefits. Politicians are reluctant to damage these interests when opponents argue the money just goes to rich actors and producers.
Author: David Reynolds, President and Chief Financial Officer