Bill Clinton Promotes Tax Breaks for the Film Industry

Hawaii lawmakers are moving forward with a bill that would expand the state’s movie production incentives programs. And as usual the stars are out in support. Actors Cuba Gooding Jr. and Branscombe Richmond testified in support of the bill. Even former President Bill Clinton submitted written testimony in support of the measure.

So Bill Clinton is now fighting for the movie industry. Why the former president cares about film tax credits in Hawaii is not immediately obvious, though it seems only natural that actors and filmmakers would like any tax break that benefits their industry. The problem is that film tax credits don’t deliver on their promises and are a waste of taxpayers’ money. They do not pay for themselves under any realistic set of economic assumptions. And the economic benefits are small and temporary at best. But lawmakers have been fooled into engaging in an arms race of tax incentives, and filmmakers can pit states against one another to maximize their tax break. The ultimate benefit flows largely to the film makers themselves.

The Hawaii Department of Taxation estimates the revenue loss from the bill at $46.3 million a year. Experience from other states suggests that as a result of the economic activity generated by movie productions Hawaii might recoup in tax revenue something like 10 or 20 cents for every dollar they give out in the form of tax credits. That’s a poor return. The best studies, those that impartially consider all the costs and benefits of film tax credits, conclude that they are not worth the cost.

For more information on movie production incentives, see Tax Foundation Special Report No. 173. For a good analysis of the many problems with the numerous studies that purport to show that film tax credits “pay for themselves,” see this Michigan Senate fiscal Agency report from September 2010.