Film Tax Credits Are a Bad Investment

Below are eight major economic studies showing the high cost and minimal return on investment from film and TV tax credits.

Do Movie Production Incentives Generate Economic Development?Kennesaw State economist J.C. Bradbury in 2018 noted that “The results indicate that neither [movie production incentives] in general, nor specific types or levels of tax credits, are associated with state economic performance.” The study analyzed tax credits across jurisdictions and time frames and found state film and television tax credits produced a negative return on investment, with the average return totaling just 27 cents per dollar spent.

Evaluation of the Maryland Film Production Activity Tax CreditA 2015 report on Maryland’s film and television tax credit by the state’s Department of Legislative Services found the credit provided just 10 cents (and only 6 cents in state tax revenue) per dollar spent by the state. Beyond that, the employment effect was minimal: “The state is actually worse off in the later years as there are fewer jobs compared to if there was no credit.”

Lights, Camera, but No Action? Tax and Economic Development Lessons From State Motion Picture Incentive ProgramsUniversity of Southern California professor Michael Thom’s 2016 paper found minimal to no impact on employment from film and television tax credits. “We looked at job growth, wage growth, states’ share of the motion picture industry, and the industry’s output in each state. On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost non-existent. Market share and industry output didn’t budge.”

Do State Corporate Tax Incentives Create Jobs? Quasi-experimental Evidence from the Entertainment IndustryIn a 2019 study, Thom followed up his 2016 paper to analyze the employment effects of film and television tax credits. He concluded: “Results mostly show no statistically significant effects.” Thom’s results aligned with the consensus view among economists that “as an economic development strategy, targeted incentive programs that carry large tax expenditures fail to encourage meaningful job creation.”

Do Tax Incentives Affect Business Location and Economic Development? Evidence From State Film IncentivesA National Bureau of Economic Research working paper in 2019 found that filming locations do change based on financial incentives, but that “there is no meaningful effect on feature films, and employment, wages, and establishments in the film industry and in related industries.”

State Film Subsidies: Not Much Bang For Too Many BucksThe Center for Budget and Policy Priorities’ Robert Tannenwald found in 2010 that “[s]tate film subsidies are a wasteful, ineffective, and unfair instrument of economic development. While they appear to be a ‘quick fix’ that provides jobs and business to state residents with only a short lag, in reality, they benefit mostly non-residents, especially well-paid non-resident film and TV professionals.”

Motion picture production incentives and filming location decisions: a discrete choice approachIn the Journal of Economic Geography in 2018, Mark Owens and Adam Rennhoff write: “We fail to find strong evidence that incentives create a more permanent movie industry in a state.”

Policy Convergence, State Film-Production Incentives, and Employment: A Brief Case StudyRichard Adkisson in the Journal of Economic Issues in 2014 found that “Ultimately, the evidence suggests that state efforts to attract film-production employment were largely ineffective.”

original article: https://www.njpp.org/publications/blog-category/reel-regret-the-high-cost-of-expanding-film-tax-credits-in-new-jersey/#:~:text=Mounting%20Research%20Shows%20Film%20and%20TV%20Tax,by%20non%2Dpartisan%20legislative%20offices%20across%20the%20country.