October 10, 2012

Better uses for scarce dollars

This op-ed appeared in the October 10, 2012 edition of the Atlanta Journal-Constitution.

Better uses for scarce dollars

By Joseph Henchman

This November, the Georgia State Archives reduces itself to three staffers due to budget cuts, making Georgia the only state without archives open to the public. Other state agencies have been asked to cut themselves 3 percent, the fifth consecutive year of budget and staff reductions.

One program not seeing cuts is the state’s annual $200 million in film tax incentives. In recent years, more than $500 million in Georgians’ taxpayer dollars has been funneled to film and television production. Your tax dollars now pick up as much as 30 percent of qualified production costs of one of America’s most profitable and successful industries.

Georgians see some benefits, it is true. The state has seen more productions. A couple thousand Georgians work in entertainment, producing everything from Tyler Perry’s hit movies to the poorly reviewed “Mean Girls 2.” But research by scholars on the left and right has found that most jobs “created” by movie productions are often temporary with limited upward mobility, the kinds of jobs that end when shooting wraps and the production company leaves.

Film tax credits will never create an independent industry. Hollywood folks are clear that if the tax spigot is ever turned off, they’re gone. This isn’t a case of the state providing a bit of seed funding to a new industry. It’s subsidizing Hollywood productions for a few weeks’ work. Studio lobbyists are eager to ask for money, but promise no loyalty in return.

When Georgia’s tax review commission looked at the credit last year, it recommended elimination. In response, those who benefit from the subsidies argued the credit doesn’t actually lose money since it is refunding tax that wouldn’t have been paid otherwise. I don’t buy that. Georgia had film productions even before the credit, but its credit is actually “transferable.” That means that if a Hollywood company gets a bigger tax refund than it owes, it can sell its unused tax credits to Georgians with big tax bills. That means the state is losing money it would have otherwise collected.

Other states are realizing that there are better uses for scarce state tax dollars than expensive and ineffective film tax incentives. By our count, state subsidies for the film industry nationwide have dropped from their all-time record of $1.5 billion in 2010. Many states are at last evaluating the programs, especially after a major embezzlement scandal in Iowa sent film officials and producers to jail.

Some states, like California and New York, are giving even more tax subsidies. California is now spending $100 million a year in film tax subsidies, and New York spends an astonishing $400 million a year. Topping them means essentially handing out money.

Perhaps a better approach is rolling out the red carpet for everyone, not just the film industry. Instead of high taxes for everyone and low taxes for a few, why not even it out so everyone pays a little less? Small Georgia-grown film productions would benefit, as would loyal Georgia businesses that create jobs year after year. As for Hollywood films, Georgians could make some popcorn and enjoy movies that citizens in other states are subsidizing with their tax dollars.

Joseph Henchman is vice president of legal and state projects for the Tax Foundation.