While $75,000 may not seem like too imposing a number in terms of the city’s $1.53 billion planned budget for the 2016-2017 fiscal year, it illustrates the misguided focus the leaders of Kansas City have in allocating taxpayer money. In making this investment, the City is missing out on the opportunity to meaningfully invest this $75,000 of taxpayer money into other projects that have clear and constructive benefits and a return on investment. Films do not.

The Show-Me Institute has repeatedly documented the failings of film tax credits in Missouri, most recently in testimony against HB 803, a proposal to reinstate Missouri’s film tax credit program (which expired without renewal in November of 2013) (here), and on the local film tax subsidy experiment that was Gone Girl (here and here). Long story short, movies almost never live up to their promises when it comes to jobs, tax revenue, or long-term economic development.

But it’s not just us. In 2010 and 2012, the Missouri Tax Credit Review Commission called for the state’s film tax credit to be eliminated because they repeatedly found that it was promoting neither long-term economic development nor even simple return on the state’s investment.

In fact, as of 2016, thirteen states (including both Missouri and Kansas)  have recognized that film tax subsidies are not high-yielding, profitable ventures in terms of providing long-term sustainable jobs, increased economic development, or a return on investment (many studies have found these state programs generate less than 30 cents for every $1 spent), and have thus decided to not have statewide film tax incentives.

Past experience shows quite clearly that film subsidies do not work and are not a prudent investment. Instead of chasing after the next Gone Girl, the city should pursue programs that are practical for economic and social development, like good schools, safe streets, and functioning infrastructure. 

The post Don’t Get Too Excited about Film Tax Subsidies appeared first on Show-Me Institute.

Since news articles reporting on the hearing only highlighted the arguments of those in support of HB 803, I’ll reiterate what analysts at the Show-Me Institute have written so many times before: Film tax credits are bad public policy!

Supporters of the program argue that the film tax credits bring immense economic benefits to the state. However, the problem with this argument is that it doesn’t look at the costs of the program along with its benefits. While supporters spout claims that “Gone Girl brought in $7 million into the economy,” the reality is the program’s return on investment (tax dollars generated versus tax dollars spent) is merely cents on the dollar. In other words, the program does not pay for itself.

Furthermore, the argument that the film tax credit helps create permanent jobs is a fallacy. Film production jobs, by their very nature, are short-lived. To add insult to injury, the highest paying jobs often go to non-Missouri residents, since production jobs require specific and highly skilled professionals. However, perhaps the most shocking fact is that Missouri has had a film tax credit program since 1999, and yet, according to data gathered by the Bureau of Labor Statistics, jobs related to film production decreased during the time the film tax credit program was in place.

It is bewildering that lawmakers can ignore important economic indicators, and the advice of the state’s own Tax Credit Review Commission, just so Missouri can play hostess to Hollywood for a few weeks. I hope legislators and political spectators will take a look at our testimony and exercise some common sense.

The post Touted Benefits of the Film Tax Credit Program Are Misleading appeared first on Show-Me Institute.

However, we should not be over-eager in offering handouts to Hollywood. Other than pride, we get little in return. As we have written before, the film tax credit has been ineffective in spurring economic development and leaves Missouri taxpayers to pick up the bill for mega-million-dollar moguls.

The intent of the film tax credit program is to provide initial seed money in an effort to create a sustainable film industry. Yet, despite the fact that Missouri offered a film tax credit for nearly 15 years, the state never became a major hub for film production. In light of this, Missouri’s own Tax Credit Review Commission wrote in their 2010 report that the film tax credit should be cut because it “serves too narrow of an industry and fails to provide a positive return on investment to the state.”

The failure of this program comes from the nature of Hollywood productions. Since nearly 40 states offer similar programs, Hollywood studios can simply wait and see which state will offer the most money for their production. With scarce resources and tight budget constraints, Missouri should not go head to head with states like New York and California on who can hand out more wasteful tax credits.

The success of Gone Girl should not overshadow the fact that the film tax credit program is bad policy for Missouri. If lawmakers are truly determined to bring more economic development to the state, then they should lower taxes for all businesses instead of offering handouts to billion-dollar industries.

The post Missouri’s Film Tax Credit Should Remain Gone appeared first on Show-Me Institute.

Last fall, when Gone Girl began production, Cape Girardeau descended into a starstruck madness. All talk focused around the movie and the stars; Facebook and Instagram became flooded with celebrity sightings. I don’t blame locals for their enthusiasm of hosting a movie star like Ben Affleck and being the center of a major film production, but I do think it is more than a little ridiculous that Missouri taxpayers will be stuck with a $2.36 million tax bill to pay for this fleeting moment in the presence of Hollywood stars.

Taking advantage of the Department of Economic Development’s (DED) Film Tax Credit program before it expired in November 2013, the producers of Gone Girl received $2.36 million in tax credits from the state to offset the cost of production and taxes on income and payroll. Tax credits are dollar-for-dollar reductions in a tax filer’s tax liability, meaning that every dollar of “credit” given by the state for projects like Gone Girl ultimately results in a dollar less in revenue to the state, which could pay for schools and other taxpayer needs.

Don’t be fooled by reports that these credits pay for themselves. The truth about film tax credits is that they bleed taxpayers to subsidize an industry that last year brought in $36 billion in revenue worldwide.

Take, for example, the $3,262 in DirectTV charges for the installation of satellite TV in the hotel rooms of Affleck, director David Fincher, and other highly paid Hollywood producers. Or try the subsidization of a movie star’s hotel room. Then there is the $70 massage Rosamund Pike received courtesy of taxpayer dollars. And, my personal favorite, $650 for an espresso maker for the cast and crew. Agreeing to these tax credits means taxpayers end up paying for outlandish expenditures that benefit Hollywood rather than Missourians.

Despite the ridiculous expenditures subsidized with taxpayer dollars, tax credits still don’t meet the basic tenets of their purpose. Take the promise of job creation for example. At the price of $2.36 million, each of the 116 Missourians hired for the production of Gone Girl should have a job that pays $20,344 for an entire year. Looking at the payroll of the production, none of these reported job positions were full-time or high-paying, and not a single Missourian is still employed in the same capacity. Furthermore, a closer look at their payroll reveals that many of the “jobs” created by the film went to out-of-state employees, businesses, and contractors—not Missourians.

Why doesn’t this tax credit work? Because Missouri does not have the proper infrastructure to support film production. Missouri has to compete with the 40 other states that have similar programs, but with much higher tax incentives. When faced with competition from states like New York and Louisiana who have hundreds of millions of dollars in film tax credits, Missouri can’t afford to compete in this race to the bottom.

Having lived in Southeast Missouri for the majority of my life, I can understand the thrill that the production of Gone Girl brought to the area. But the ugly truth is that these film tax credits don’t provide the jobs and economic growth that Cape Girardeau and Missouri need. Let’s leave Hollywood in California so that Missourians don’t have to finance celebrities’ espressos or massages and focus on attracting businesses and investors to Missouri that won’t leave taxpayers to foot the bill.

Jessica Stearns is an intern at the Show-Me Institute.

The post A Look Past Gone Girl Excitement Reveals a Raw Deal for Missourians appeared first on Show-Me Institute.

These figures, however, fail to acknowledge that the jobs are temporary and part-time. Even more troubling, most of the higher-paying jobs used in the production of Gone Girl went to nonresidents who were brought in from LA. Now that the production of the film has finished, these so-called “created” jobs are gone.

Despite the reality of failed promises of job creation, many legislators and supporters are calling for the reinstatement of the film tax credit (which expired in November 2013) to entice movie producers to film in Missouri. The tax credit, which reduces the production companies’ tax liability, is intended to generate substantial economic activity and jobs as a result of the productions.

There is little evidence to support the notion that these tax credits are successful. A 2010 study by the Tax Foundation, however, shows that film tax credits don’t create long-term jobs, nor do they create sustainable economic growth for the state.

Most film production jobs are filled by out-of-state residents specializing in particular areas of audio or visual production. Additionally, producing a film is a relatively short-term venture in comparison to other investment projects. Since most of these positions are not permanent, “workers are left unemployed” after the production ends unless a steady stream of films is present.

The ugly truth of film tax credits is that they bring an industry into a state that doesn’t have the proper infrastructure to support said industry, and thus they do not produce long-term, well-paying jobs. Missourians deserve more than a brief moment on the silver screen. Instead, Missouri policymakers need to invest in ventures that will bring long-term economic growth to the state.

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