State Film Tax Credit Program Reading List

In Mound City Money, David Nicklaus highlights a recent study from the Center on Budget and Policy Priorities that demonstrates the ineffectiveness of state film tax credit programs. This is particularly well-timed, because the Tax Credit Review Commission just voted to recommend eliminating this program in Missouri. From the study:

• No state can “win” the film subsidy war . Film subsidies are sometimes described as an “investment” that will pay off by creating a long-lasting industry. This strategy is dubious at best. Even Louisiana and New Mexico — the two states most often cited as exemplars of successful industry-building strategies — are finding it hard to hold on to the production that they have lured. The film industry is inherently risky and therefore dependent on subsidies.

Regular readers of Show-Me Daily know that I am a frequent critic of these programs. The following is a list of additional recent studies that I have referenced previously, all of which are specific to film tax credit programs. Each of these concludes that film tax credit programs have negative fiscal consequences for states. If any of you are aware of quality literature on the topic that I may have excluded, please leave a note in the comments section of this post.

1. In October 2010, the state auditor’s office in Iowa released a report on the state’s film tax credit program, which was subject to recent scandals. The auditor found that a full 80 percent of the credits that the state had granted were issued improperly — amounting to more than $25 million.
   
2. In September 2010, the Senate Fiscal Agency in Michigan released a study showing that the state spends more on film tax programs than they generate in economic activity. For example, in fiscal year 2010–11, Michigan will spend $125 million on film credits, which will generate merely $13.5 million in new tax receipts. This amounts to a net fiscal cost of $111.5 million.
3. In March 2010, the Wisconsin Department of Commerce published a cost-benefit analysis of the state’s film tax credit program, reporting that it costs 20 times more to create a job using the state’s movie tax incentive program than it does using other state job creation programs.
4. In January 2010, Tax Foundation released a study, “Movie Production Incentives: Blockbuster Support for Lackluster Policy,” concluding that production incentives such as targeted tax credits do not spur economic growth.
5. According to a 2007 study by Oxford Economics, “The Economic Impact of the UK Film Industry,” the film industry has a multiplier of only 2.0. This is lower than the multiplier for the economy average, and indicates that the indirect impacts on employment and output from the film industry are not very far-reaching. Even if there were a significant multiplier when money is spent in the economy, then certainly permanent businesses would provide more favorable returns — not short-lived activity such as film productions.