Movie production incentives in the United States
Movie production incentives are tax incentives offered on a state-by-state basis throughout the United States to encourage in-state film production. Since the 1990s, states have offered increasingly competitive incentives to lure productions away from other states. The structure, type, and size of the incentives vary from state to state. Many include tax credits and exemptions, and other incentive packages include cash grants, fee-free locations, or other perks.
Proponents of these programs point to increased economic activity and job creation as justification for the credits. Others argue that the cost of the incentives outweighs the benefits and say that the money goes primarily to out-of-state talent rather than in-state cast and crew members.
Studies show that tax incentives for movie and television productions have low overall economic effects, with low rates of return for states that offer the incentives.[1][2][3][4][5]
History[edit]
In the 1990s, U.S. states saw the opportunity to launch their own production incentives as an effort to capture some of the perceived economic benefits of film and TV production. Louisiana was the first state to do so in 2001, and in 2002 passed legislation to further increase the scope its incentives. Over the next three years Louisiana experienced an increase in film and television productions some of which were nominated for Emmy Awards. The perceived success of Louisiana's incentive program did not go unnoticed by other states, and by 2009 the number of states which offered incentives was 44, up from 5 in 2002.[6] Critics have suggested that the increase in states offering incentives mirrors a race to the bottom or an arms race because states continue to increase the scope of their incentive packages to compete on a national level to not only maximize their individual benefits but also to stay ahead of their competitors.[6]
In 2013, Los Angeles mayor Eric Garcetti appointed former Motion Picture Academy president Tom Sherak as the city's first "film czar" to advocate the state on behalf of the city for more favorable movie production incentives,[7] an office then held by entertainment attorney Ken Ziffren.[8]
Economic impact[edit]
Studies show that tax incentives and subsidies for movie productions have low overall economic effects, with low rates of return for states that offer the incentives.[1][2][3][4][5]
Proponents of production incentives for the film industry argue that it increases job creation, small business and infrastructure development, tourism, and tax revenue generated.[28][29] Tax incentives in Georgia were also credited with increasing the membership of entertainment-related labor unions in that state.[30] Although film tourism has sometimes been cited as a possible example of film and television tax incentives, claimed examples of the phenomenon tend to be anecdotal and there is no reliable method for measurement.[31]
Overall economic losses to the US due to runaway productions are difficult to measure, as the perceived economic benefit of film production could include benefits from tourism in the short and long-term, local job creation, and any number of other benefits. Most methods of measuring such economic benefit apply a multiplier to production costs in order to account for the lost opportunities from taxes not collected, jobs not created, and other revenues that are lost when a film is made outside of the US. A 1999 study by The Monitor Group estimated that in 1998 $10.3 billion was lost to the US economy due to runaway productions.[32]
Movie production incentives do not necessarily result in the creation of jobs. Rather, the economic impact is that of a transfer of jobs from one location or state to another.[6] Additionally, unless the state in question has a consistent stream of productions, the project-based nature of the film and television industry generates short-term jobs that eventually leave specialized laborers out of work.[6][33]
States have a tendency to use vague language and refer to successes in other states when advocating in support of production incentives. Critics maintain that information is selected to present positive results, and that states rely too heavily on perceived successes in other states without adequately considering how available resources within the state will impact their respective economies.[6] States often incorrectly use economic measurements, such as a multiplier or an increase in different types of tax revenue, to promote film tax credits. When comparing multipliers across different projects, movie production incentive multipliers tend to be smaller than those for other investment projects (e.g. nuclear power plant, hotels). Revenue from alternate taxes not covered under tax credit policies do not always cover the original cost of the given film tax incentives.[6]
Politicians focus on immediate, short-term projects because it is politically easier to change these incentive policies. However, a focus on improving baseline tax policies to incentivize long-term private investment in industry would lead to higher levels of job creation, productivity and economic development.[6]
Critics of MPIs include the Tax Foundation, which published a 2010 study saying that MPIs "have often escaped routine oversight about benefits, costs and activities" and favor a politically connected industry over other industries.[6] Critics propose that unilateral or multilateral moratoriums[34] and federal intervention be used to solve economic inefficiencies created by MPIs.[6] For example, in a 2009 article, entertainment attorney Schuyler M. Moore proposed a federal tax credit combined with complete federal preemption of all state-level tax credits in order to halt the states' race into insolvency.[35]
Content conditions[edit]
Some states that grant significant MPIs have content requirements, limiting grants to films that portray the state in a positive light to benefit state travel and tourism departments.[6] Hawaii's MPI program offers one-third more funding to productions that include "Hawaiian terminology in the title" or that promote "Hawaiian scenery, culture, or products" in the film.[6] The Tax Foundation argues that "Requiring films to pass a sensitivity test before being granted a credit subsidizes government-approved opinion with taxpayer dollars" and constitutes "some degree of censorship."[6] New Mexico bars films with an R rating from receiving credits unless the Private Equity Investment Advisory Committee, a politically appointed board, deems the film "acceptable";[6] the state committee barred movies deemed culturally insensitive or sexually explicit from receiving tax credits.[36]
