Film Incentives Clearly Hurt

Neal Rubin laments the elimination of Michigan’s film incentive at The Detroit News. But he paints a false picture of the scholarship on this subsidy.

The incentives work — 37 other states currently have them — but at a cost. What cost, and what value, depends on who’s crunching the numbers.

There are plenty of policies where economists can find different effects, but the studies of film incentives are clear. As Dr. Michael Thom, a professor at the University of Southern California, recently wrote:

Think tanks from across the political spectrum — including the liberal Center on Budget and Policy Priorities, conservative American Enterprise Institute, libertarian Reason Foundation, and nonpartisan Tax Foundation — have argued that [film incentives] don’t succeed at creating jobs or growing the economy.

Scholars tend to agree. Multiple peer-reviewed studies suggest that tax incentives targeted at specific industries do not generate long-term growth. They do little more than lure states into a competitive bidding war, where each state tries to outdo the others by spending more and more on tax incentives.

Michigan policymakers closed down a program that cost taxpayers millions. They should look to the state's other so-called economic development programs.

One country over the past 20 years or so has moved from a Socialistic/Communistic bent towards capitalism. At the start of the process, the gov’t controlled a little over a third of the economy in terms of it share of GDP. Taxes were confiscatory, both on personal and corporate income. Economic growth, in real terms, was negative.

Today in that country, personal and corporate income tax rates are 15%, the gov’t share of GNP has fallen to 22% and continues to decrease. Private investment has exploded and economic growth reversed and is now over 4%. The country: Chile.

What do you think would happen in the US if corporate and personal income taxes would be flat at 15%? There would be a stampede of foreign investment, particularly from the Pacific Rim, to the US, unemployment would drop like a stone, growth would increase and I’ll even bet that tax receipts would actually increase, easing pressure on the Federal debt.

So why don’t we do that? Because the average person would see this as a break for business and the rich, and that’s how the MSM would paint it. Never mind that a rising tide lifts all boats, or that even if your share of the economic pie remains fixed at, say, 10%, if the pie doubles your income doubles, the illiterate voter in this country would kill it because the rich are still rich. True, but they are what drives this economy via investment.

The MSM romanticizes the poor and denigrates the rich, yet: How many of you were hired by a poor person? Alas, there are more stupid people than smart people and, even worse, they get to vote.

I call BS. Lefties don’t like the film industry leaving leftyfornia. Film in Georgia has been an economic boom. From Walking Dead to Fried Green Tomatoes, filming has brought millions Ana millions to Georgia from direct cash such as hotel rental, catering and employment to indirect tourism because people come to visit places they see in movies.

This is a California/Hollywood story, imho.

Gee now............... Lower taxes help boost ONE little industry............. What if.... They tried it FOR EVERYBODY?? What could happen THEN??

Currently, 38 of the 50 States of the Union offer film incentives (read: subsidies). So I ask, conversely: What would happen if all 50 States were to likewise offer the same level of such incentives? Say: 10%? Then, States would pay through the nose, but there would be no net effect (except taxpayer pain), since all of the States would be paying, but filmmakers would continue filming where it made most sense (from the point of view of narrative).

Regards,

Even if you agree with subsidies for your own industry---and I don't---here is how the OH film tax rebates/refunds DON'T help "create a film industry in OH" as they are touted to do.

The way the OH film tax break works is that for every $ spent on making a film in OH over $350,000, up to 35% will be refunded upon the very next calendar year after you file the final paperwork. So if you wrap up your film in 2015, you can get a refund in 2016.

However, most independent films are shot for under $1m, and a majority probably for under $500,000. So even if you shot 100% of your film in OH using only OH talent, you would only be eligible for $52,500 in a refund to your investors. Nothing to sneeze at, but it's not going to come close to "paying" for the movie. But for those who make films at $350k or under (which, believe me, is where a lot are made) you get no refund even if you shoot the whole thing here.

Meanwhile, the big studios can bring a film project in at $20 million and after subtracting the $350k, still get an incredible refund even if they don't shoot the whole movie here. Economies of scale and all that.

But the point is---and again, I don't defend subsidies for anyone---if you goal is to "build a local film industry," this works against that entirely. It rewards outside poachers while doing nothing for those who reside here to work their way into the big leagues.

It is also rife with fraud in ways I cannot go into here.

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