Missouri and Utah Compete for Filmmakers’ Favor Using Tax Credits

While I was up in the air traveling over the weekend, I found an article in my in-flight magazine that advertised Utah’s film tax credit program.

Utah’s film tax credit program is less generous than Missouri’s — filmmakers get 20 cents back on every dollar they spend in Utah, but they get 35 cents back for every dollar they spend in Missouri.

According to the article, Utah has “a rare mix of different locales,” “limitless vistas,” and “abundant post-production facilities.” The state is “filled with good, honest, hard-working people,” and boasts “some of the most beautiful countryside.”

Doesn’t that sound familiar? Isn’t that exactly the language that supporters of film tax credit programs use to describe Missouri?

Additionally, from the article (emphasis mine):

“Currently, we offer a 20 percent cash rebate program based on a $1 million minimum direct spend in the state,” says Marshall Moore, director of the Utah Film Commission. It’s an incentive Utah hopes to extend for at least five more years and possibly increase to as high as 30 percent.

This shows how states try to out-compete each other by providing ever-increasing incentive packages to filmmakers. They engage in a bidding war. (I have highlighted before how this happens in the auto industry.) Policymakers have little incentive to keep the amount of these incentives in check, because taxpayers are the ones left to pick up the tab. This is obvious from the article, which says that Utah’s state government is considering increasing the amount of its tax credit. Hopefully, this won’t give policymakers in Missouri a reason to increase this state’s tax credit.

If Missouri and Utah both offered a tax credit of 30 to 35 percent of total in-state expenditures, how is that different than if neither had offered the credit at all?

As regular readers will know, film tax credit programs fail to make money for a state. Most of the production expenses are single-time costs that don’t resonate through the state economy. This is because the residents of the whole state pay for a movie that’s made in one town. A movie in St. Louis, for example, may add to the city’s revenue, albeit briefly, but it does nothing for Hannibal or Joplin. A better way to grow the economy than funneling taxpayers’ money through filmmakers would be to eliminate the program and let Missourians themselves keep their earnings to use as they see fit in the private sector.

Even if states like Utah continued their programs, policymakers in Missouri would be wise to stop providing tax credits to filmmakers. If film productions go to Utah instead of Missouri, Missourians would still be able to see films. However, instead of propping up an entire industry through their taxes, they would only have to pay the price of a movie ticket. I said it before and I will say it again: States would be better off if they disbanded their film tax credit programs.

Some people question whether ending the film tax credit program is feasible or realistic. I believe that it is. For example, the Tax Credit Review Commission recommended eliminating the film tax credit program because they determined that it is underperforming. Policymakers in the Missouri state legislature have yet to act on this recommendation, however. Fortunately for taxpayers, more and more states are realizing that they can entice businesses and industries without targeted tax credits.