The scene: Jefferson City, at the state capitol. Government officials want to give taxpayer money to wealthy business interests so that they'll produce movies in the Show-Me state, even though they know it's a waste of funds. And then there's the twist! Imagine that this proposal kept dying, and then kept coming back year after year after year…

In other words, it's a zombie movie.

Scary, right? Well…

Missouri's film tax incentive program expired in 2013, but there are signs that film tax credits are coming back to life in the Show Me State. . . . HB 1645 has been introduced which would reinstate the film tax incentive program in Missouri. Under the bill, companies could get a credit of 20 percent for qualifying expenses, both in and out of the state. They would be able to get an additional 5 percent credit if at least 50 percent of the project were filmed in Missouri.

Our stance on economic development tax credits is pretty well-known; we would rather have market forces decide what a good investment is rather than have the government act as a sugar daddy for special interests. That rule of thumb for tax credits generally holds true for film tax credits, as well. Instead of paying for goodies for George Clooney, government should focus on, well, governing. Maintaining infrastructure. Protecting the public. Providing a stable and low-tax climate.

Also, not producing movies. Did I mention government shouldn't be producing movies? Good.

I appreciate that getting into the movie business sounds fun, but if Missouri policymakers want to act like directors, they should do it with their own money, not yours. Film tax credits are wasteful, and rather than be resurrected, they should stay dead in Missouri. Taxpayers don't need another terrible remake of this bad policy.

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But the problem, Lynch says, is the lack of financial incentives available for movie production in Missouri. Though the state still offers the film production tax credit, Missouri Gov. Jay Nixon shut down the Missouri Film Commission in 2011, and the Missouri Accountability Portal shows that no film tax credits have been issued for 2012.

From KSDK:

Missouri actually has $4.5 million to use for tax breaks, but the Department of Economic Development doesn’t have anyone to recruit out-of-state productions.

“It hurts the city, it hurts the state and it ultimately hurts us because we’re forced to go elsewhere for monetary reasons,” said Lynch.

One way to answer the question of whether a lack of film tax credits hurts the state is to look at what film tax credit money has subsidized in the past.

The 2009 film “Up in the Air,” which starred George Clooney, was filmed in Saint Louis, and was issued $4.1 million in tax credits from the state. Under Missouri’s Film Production Tax Credit program, movie productions are reimbursed for a portion of their expenses.

In 2010, the Show-Me Institute requested documentation from the state Department of Economic Development (DED) that showed what expenses associated with the film tax credit program were deemed eligible for partial reimbursement. The documents we received are now posted online.

Below are some expenses that the production of “Up in the Air” incurred and the DED deemed eligible for the Film Tax Credit program:

* More than $11,000 in living allowance money for Director Jason Reitman.

* $5,600 for George Clooney to stay at the Chase Park Plaza.

* More than $8,500 in living allowance money for Vera Farmiga.

* More than $11,000 in living allowance money for Executive Producer Michael Beugg.

If having state taxpayers fund living expenses for high-paid actors and directors while working on “Up in the Air” is not concerning enough, recent reports have found state film tax credit programs lacking.

If Lynch really thinks Saint Louis is the best place to film her movie, then make it here. But if tax credits are necessary, I would prefer she stay in East Saint Louis.

P.S. Lynch is not the first person to think that using film tax credits to subsidize a movie about a serial killer is a good idea. Jack Donaghy ran with that in 2011.

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Several weeks ago, Ira Glass opened his nationwide hourlong “This American Life” program with a satiric interview about one of the defining elements of Nixon’s leadership: his whirlwind trips around Missouri to celebrate state-funded job creation schemes.

Glass described his visit to a plant that made fishing reels, “to announce not hundreds of jobs, or dozens of jobs, but eight jobs,” Glass marveled. “Eight! He did a press event for eight jobs!”

At this point, Nixon chimed in, saying, “That’s not the smallest we’ve been to, either. We actually did one in north Missouri where we created one job.”

“And you showed up?” Glass asked, laughing in disbelief.

Nixon affirmed that he had. A program that he initiated had given a low-interest loan to a woman in Bethany. This enabled her to move her T-shirt printing business from her basement to a storefront, and to hire a single employee.

“This is what it’s come to, America,” Glass hooted. “You can hire your very first employee, and the governor shows up with TV cameras.”

At the Show-Me Institute, we have pointed out the flawed thinking behind a wide variety of schemes intended to promote job creation and economic development — ranging from big-budget Hollywood movies to plans for building an “Aerotropolis” in and around Lambert-St. Louis International Airport.

A total of $4.5 million in tax credits were issued to the makers of the George Clooney film Up in the Air, as an enticement for filming a large part of the movie in the Saint Louis area. How much good did that do for job creation and the local economy? Almost none, it seems. According to the casting call, extras were compensated only $7.05 per hour before taxes, and they worked all of one day.

In the Missouri legislature, there is support from both parties for an enormous tax credit bill that would subsidize the construction of $300 million worth of new warehousing space in and around the Saint Louis airport, while doling out another $60 million in tax breaks for freight forwarders. Nixon backs the proposed legislation, which may be raised at a special session of the legislature later this year.

Proponents say the extra warehousing space is needed for processing cargo going to and from China. However, as we pointed out, there are acres and acres of unused warehousing space in and around the airport. So, why are our lawmakers in a hurry to build more warehouses? Especially when there is no commitment from China to support the project?

Politicians will often argue that even one job created through tax credits or subsidies is better than none. To think in this way, however, is to engage in single-entry bookkeeping — counting jobs gained but ignoring jobs lost because of higher taxes or the burden of increased public indebtedness. Add to that the misallocation of resources that always occurs when power-hungry or publicity-seeking politicians, rather than paying customers, decide what is to be produced and who should produce it.

Our state government is already straining to meet its current commitments. Every dollar that is given away in tax credits is a dollar that our state government must replace by increasing taxes or making cuts in current programs.

“Being governor of the state is not a theoretical job,” Nixon said at a recent press conference. “It is a very practical job.” Here, then, is some practical advice for our governor: Get out of the job-creation business. It’s doing more harm than good.

Andrew B. Wilson is a fellow with the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post How (Not) to Create Jobs: Some Advice for Gov. Jay Nixon appeared first on Show-Me Institute.

You can watch the full episode here:

In the episode, Jenna stars in a horror film that’s shot in Connecticut. It turns out that Connecticut will only give tax credits to films that promote tourism. So, instead of shutting down the film, the producers change it to be very pro-Connecticut. They decorate the killer’s dungeon with Yale pennants and  posters that say, “Visit Connecticut.” They also write www.IheartConnecticut.com in blood on the wall, and they dress up one of the victims in a UConn Huskies shirt.

They even change the dialogue:

SLAUGHTERFACE: “No one is going to save you. Because we’re deep inside one of Connecticut’s 30 beautiful state forests. Thirty!”

JENNA: “Oh, please don’t kill me! I still haven’t tried the famous seafood pizza at Sally’s in New Haven.”

It’s hilarious. This shows how filmmakers will change the message of their films in order to get film tax credits from a state. This is something that I have discussed before on the blog.

It’s no secret that government officials sometimes deny tax credits to films that don’t send a positive message about the state. It may be possible that this happens in Missouri, too. Consider Up In the Air, which received $4.1 million in tax credits to shoot in Missouri in 2009. One scene sounds like a commercial for Lambert Airport. At one point, George Clooney’s character says:

Are you kidding — Lambert Field? The Wright brothers flew through there. That domed main terminal is the first of its kind; it’s a precursor of everything from JFK to de Gaulle.

This wasn’t the first time that “30 Rock” highlighted the ludicrousness of film tax credit programs — It was also a plot point in an episode last season, in which Jenna starred in a movie about werewolfs that shot in Iceland. They shot the film there because the Icelandic government gave them tax credits, but they could only shoot during the one minute of darkness each day.

In economist-speak, we would say that Iceland does not have a comparative advantage in werewolf films, relative to other locations. (Similarly, Missouri doesn’t have a comparative advantage in filmmaking. We’re better at making other things!)

The post Film Tax Credits Featured on “30 Rock”! appeared first on Show-Me Institute.

Year end is a time to reflect — and to think ahead. In the holiday spirit, the Show-Me Institute has compiled a list of five New Year’s resolutions for state officials, to promote better government for 2011 and beyond. Taken together, these policy changes have the potential to propel Missouri’s income and job growth into the front ranks.

First, lose weight. The Nov. 2 election showed that the overwhelming majority of Missourians (and Americans generally) want smaller, less intrusive government and reduced taxes. Missouri legislators should therefore unite to kill pork barrel spending projects and make major spending cuts.

Municipalities need to rein in runaway pension costs for city employees, including firefighters and police. They should also consider privatizing the provision of water, electrical power, and other services. The Show-Me Institute has produced a wealth of research demonstrating the benefits of privatization, which creates much-needed cash through the sale of public-owned assets and contributes to municipal revenues through the addition of new taxpaying entities in the private sector. Research shows that privately owned utilities consistently provide more efficient services than their public-sector counterparts.

Second, stop meddling in other people’s business. The Show-Me Institute has spotlighted the proliferation of needless licensing requirements that do nothing to promote public safety in businesses as different as home heating and air conditioning work (HVAC) and African hair-braiding. Such requirements are often promoted by established businesses as a means of inhibiting competition and choice.

Third, give families real school choice. Our research has consistently shown that education is improved when parents and students are given more choices and traditional public schools face greater competition from charter and virtual schools. Adjusted for inflation, we spend four times as much for education in urban areas today as in 1960, but educational achievement is no higher. Today, the Saint Louis and Kansas City school districts spend more than $15,000 per pupil — more than all but the most expensive private schools. Charter schools provide a real opportunity for poor students stuck in failing schools. They also enable teachers and administrators to innovate more freely, and force other public schools to improve their performance in order to compete successfully.

Fourth, halt the silly business of awarding specialized tax credits to favored enterprises. In one of my op-eds about the inanity of tax credits for favored industries, I pointed out that government policy should not prefer filmmaking over, say, hog farming, “simply because one is considered to be more glamorous.” Most of the local jobs created by Missouri film productions like Up In the Air were both low-wage and temporary — many lasting only a single day. Missouri should do away with its development tax credit programs, which have a record of failing to boost either income or employment — even if you do like George Clooney.

Last but not least, repeal the state income tax and replace it with a broader sales tax. The adoption of such a plan in 2011 would be the single most important step that Missouri could take to move Missouri to the front of the pack in terms of growth. The noted economist Arthur Laffer, who spoke at the Show-Me Institute in October, observed that during the past decade, the nine states without a personal income tax have “outperformed those states with the highest personal income tax rates by 26.5 percent, and have outperformed the U.S. average by 20 percent.” Even more impressive, those nine states “outperformed Missouri by a whopping 41.5 percent.” Eliminating the income tax would encourage people to work and save more, crucial factors for economic growth. A broader sales tax can also be balanced with mechanisms that would compensate those with lower incomes for any potentially regressive effects.

In the past, it has often seemed that major changes originate on the coasts and slowly make their way to the heartland. I think that flow has been reversed during the past year and a half. I believe that Missouri — and the heartland — will play a leading role in our nation’s economic recovery. We will do so through a renewed commitment to free enterprise.

Christine Harbin is a policy analyst for the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.

The post New Year’s Resolutions for Missouri Public Policy appeared first on Show-Me Institute.

But some benefits can’t just be measured on a dollar-for-dollar basis. […] They expose non-Iowans to what the state has to offer. More intangible is the benefit of interactions in a state that can be cut off from the trends and centers of power. Not to mention the excitement factor. We’ve relied on caucuses every four years to bring action and celebrities to town. Now, sightings are anytime, any place.

I wonder: What is the economic multiplier for a celebrity sighting? (Or, for that matter, a Land Rover?) How much extra output does it yield for the state? Would the prospect of a celebrity sighting motivate more people to move to Missouri? If Missouri residents see Justin Bieber walking around the Central West End in Saint Louis, will it encourage them to purchase more goods and services than they would otherwise?

Additionally, I suspect that the majority of Iowa residents do not score invites for über-exclusive A-list parties that are held in the state. That’s unfortunate, since they’re the ones picking up the tab. (Talk about an egregious case of concentrated benefits and diffused costs! If such a party were held in Missouri, I suspect that the film industry wouldn’t let me in.)

It reminds me of a statement that Rep. Tim Flook made at a recent Tax Credit Review Commission meeting that I heard secondhand. His statement concisely demonstrates that, by subsidizing certain activities (in this case, celebrity sightings and A-list parties), the government crowds out private investment and economic activity elsewhere in the economy:

I watched (hi-tech companies) leave as George Clooney was shaking hands in STL

Also on the subject of state-provided film incentives, a different Show-Me Daily reader sent me a link to an article saying that Michigan is reconsidering scaling back its program. (Maybe their state government was inspired by ours in Missouri?) Not surprisingly, subsidizing celebrity sightings apparently hasn’t assuaged the economy in Michigan.

The post “Now, [Celebrity] Sightings Are Anytime, Any Place” appeared first on Show-Me Institute.

According to the New York Times article:

“This film is unlikely to promote tourism in Michigan or to present or reflect Michigan in a positive light,” wrote Janet Lockwood, Michigan’s film commissioner.

Missouri may or may not officially require that films promote the state as a condition of receiving tax credits, but there seems to be a correlation. I’m reminded of a scene from Up in the Air, which cashed $4,131,011 in Missouri tax credits in 2009, when George Clooney’s character sang an ode to “historic” Lambert–St. Louis International Airport:

Are you kidding — Lambert Field? The Wright brothers flew through there. That domed main terminal is the first of its kind; it’s a precursor of everything from JFK to de Gaulle.

On one hand, officials are not saying that the movies considered in the New York Times article can’t or shouldn’t be made; instead, they’re saying that the films won’t receive subsidies. On the other hand, by placing restrictions on which genres of film that it will subsidize, the government helps to pick winners and losers within an industry that is already favored.

If a state decides to subsidize certain films and not others, it should be clear and upfront about the intention of the program. Does it exist to create jobs? Economic growth? Tourism? Positive net domestic migration? Something else? If the purpose of the film tax program is to support an infant film industry, there is no reason to dictate the terms of the presentation. (This begs a further question: Would a film that featured cannibals generate a dissimilar number of jobs and economic activity to a film that didn’t?) If the purpose is to promote the state as a tourist destination, however, officials should be up-front about their intentions.

Furthermore, the practice of approving or denying the content of a film encourages people to ask the government to affirm their preferences, much like state symbols. As communicated in the article, this can even include moral judgments:

In Florida, a recent legislative proposal to bar a special tax credit for family entertainment from films or shows that exhibit “nontraditional family values” was dropped after it was widely criticized as seeming to exclude gay characters.

The moral of the story for filmmakers? If a filmmaker wants to secure film tax credits, he or she should brown-nose bureaucrats by promoting their state.

The post Now in Theaters: Greetings From Missouri, The Show-Me State appeared first on Show-Me Institute.

It is exciting that the private commercial airport in Branson is expanding its operations; it is also exciting that at least some airline service in mid-Missouri can be operated at a profit without government support. Here is to hoping for much more of both!

The post More Good News for Aviation in Missouri appeared first on Show-Me Institute.

The new Jason Reitman film, Up in the Air, premiered at the Tivoli Theatre in University City last month. Many are using the event as an opportunity to promote film tax credits, to be used as a means of bringing more film productions to Missouri. Currently, the state offers a film production tax credit for up to 35 percent of the amount spent in Missouri for activities related to film production, up to $4.5 million. Although reducing tax burdens is generally a good idea, there are several reasons to oppose tax credits targeted to filmmakers.

States tend to spend more revenue by attracting filmmakers with tax credits than the filmmakers generate while working in the state. For an example of what not to do, Missouri should look to Wisconsin, which offers a refundable tax credit of 25 percent for all production-related activities, as well as the use of state-owned buildings and locations free of charge. When Johnny Depp and Christian Bale filmed Public Enemies in the state capitol building in Madison, the state lost money. According to the Wisconsin State Journal, the state paid $4.6 million to the filmmakers in credits, even though the film generated an estimated $270,000 in state taxes. Furthermore, filmmakers can frequently claim more than they paid in taxes, because refundable tax credits function like grants.

Additionally, this economic activity is short-lived. As soon as the filmmakers complete their shoot, they pack up their sets and leave the state. Certainly, many area residents are cast as extras in these films, but these jobs are both low-wage and temporary. According to the casting call for Up in the Air, extras were compensated only $7.05 per hour (before taxes), and they were asked to work for just one day. If the state were truly focused on creating productive, long-term jobs, it would target activities that are more permanent than film shoots. Rather than offering these film tax credit programs, Missouri should encourage employers to create jobs that are better compensated and longer lasting.

There are also fundamental downsides to targeted tax credits in general, not only those that target filmmakers. These programs reinforce the idea that government should be able to pick and choose which economic activities may occur within its borders. Government officials should not have the role of deciding who wins and who loses in the marketplace; they should allow businesses to succeed or to fail as a result of their own efforts, and the preferences of consumers.

Furthermore, targeted tax credits establish a system in which government favors certain businesses over others. These programs force every non-favored business to compete at a comparative disadvantage, creating inequality. Government policy should not prefer filmmaking over hog farming, for example, simply because one is considered to be more glamorous. This sort of favoritism breeds corruption, because it encourages all businesses within a state to seek the favor of their elected officials and solicit the government for special treatment.

There are ways to structure tax policy that would encourage job creation and also maintain a level playing field. If the government reduced or eliminated the commercial property tax surcharge or the earnings tax in Saint Louis, for example, it would decrease the overall cost of labor and employers could hire more people.

I understand why Midwestern states offer tax credits to filmmakers: They want to attract celebrities. Certainly, it’s exciting for the hoi polloi to recognize their local haunts on the big screen and to spot celebrities like George Clooney and Johnny Depp. Rather than competing with other star-struck states, however, Missouri should leave filmmaking to states that specialize in it, like California, and then realize gains from interstate trade. If Missouri wanted to take part in a red-carpet film premiere, it would make much more economic sense to provide the Michelob than to give away tax money in exchange for the “privilege” of hosting the event.

Christine Harbin is a research analyst with the Show-Me Institute, a Missouri-based think tank.

The post Film Tax Credits Don’t Bring Lasting Jobs or Significant Revenue Gains appeared first on Show-Me Institute.

I could support the film tax credits if they actually did attract money from outside of Missouri. But, as I have blogged previously, this just doesn’t happen; states tend to spend more attracting filmmakers with tax credits than the filmmakers generate in the state. I have not been able to find information about how much money Up in The Air generated for Missouri, but I would not be surprised if that number is less than the $4.5 million in tax credits that it was awarded. I will continue to look for this information.

Instead of film tax credit programs, Missouri should spend its money on programs that create jobs that are better-paying and longer-lasting. We see from the KMOV video that these film tax credits do not result in sustained job creation. Certainly, many St. Louis residents are cast as extras in these films, but these jobs are low-wage and temporary. According to the casting call for Up In the Air, extras were compensated only $7.05 per hour (before taxes) and they were asked to work for just one day. Aspiring actress Adrienne Lamping was quoted in the video saying that she got to work on set for a week, but discloses that she does not have an acting job lined up in the future.

I understand why states like Missouri want to attract filmmakers. Certainly, it’s exciting for the hoi polloi to recognize their local haunts on the big screen and to spot celebrities like George Clooney. Unfortunately, however, almost nobody discusses the sheer cost of these programs.

The post Film Tax Credits Are Bad for States appeared first on Show-Me Institute.

The online copy of this article is truncated and only available to paying subscribers. But, for those of you who received a print copy this morning, I encourage you to browse through it. It’s on page 45.

Also, be sure to read the Show-Me Institute’s three previous commentaries about why using tax credits to promote economic growth is a recipe for economic stagnation.

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