Iowa Is Cutting Its Film Tax Credit Program Permanently (And Missouri Should, Too!)
Remember how, earlier this year, some individuals abused Iowa’s film tax credit program by inflating expenses and buying luxury vehicles? Well, after stopping Iowa’s film tax credit program, that state’s governor recently announced that he does not intend to restart the program for new film projects.
Cutting the film tax program will have many positive consequences for Hawkeyes. For one, they won’t be forced to sink money into an industry that is not efficient, cost effective, or sufficiently demanded. Additionally, they will be better off because they can achieve a higher indifference curve by spending their money on a bundle of goods and services in the private sector that more accurately satisfies their needs and wants. They will also be able to focus on producing the goods and services for which they have a comparative advantage, and then engage in mutually beneficial trade with individuals and companies in other states. This means that Iowans will still be able to consume films, and they will be able to increase their consumption of other products, too. Furthermore, they will only have to pay the cost of a movie ticket or a DVD — not millions of dollars in subsidy to the film production industry.
Cutting the film tax credit program does not imply that film production will halt in the state. For example, Wisconsin, my home state, has similarly scaled back its film tax credit program and it is able to attract blockbuster film productions all the same.
Even if there were a comprehensive audit of a film project before state tax credits were issued, this program still wouldn’t be a worthwhile expenditure of state funds. To this point, I particularly like the following quotation from Iowa’s governer about the economic impact of his state’s film tax credit:
“That has never been a focus that really makes a difference in terms of job creation and economic development.”
Policymakers in Missouri would be smart to follow the examples of Iowa and Wisconsin. Missouri’s film tax credit program is structured very similar to Iowa’s (former!) program, except that it is even more generous — Iowa provided a 25-percent tax credit, and Missouri provides up to 35 percent.