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The Poor Economics of Florida’s Film Incentives

2 min readBy: Jared Walczak

Last week, I testified before Florida Senate Appropriations Committee and met with members of the Florida House to discuss the poor economics of film incentives.

After years of the film industry reporting incredible returns on investment—often 5-to-1 or better—for state film taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. credits, state revenue offices and legislative bureaus are increasingly turning a critical eye on these claims. Their own studies tell a remarkably different story, one of states jockeying with each other for the privilege of losing money. The Massachusetts Department of Revenue recently found that the state spent more on credits than the industry actually spent in the state, that Massachusetts recouped only 11 cents on the dollar in tax revenue, and that the average new job cost the state nearly $119,000 in tax creditA tax credit is a provision that reduces a taxpayer’s final tax bill, dollar-for-dollar. A tax credit differs from deductions and exemptions, which reduce taxable income, rather than the taxpayer’s tax bill directly. s—and frankly, it could have been worse.

The numbers generated by the industry, and by state film offices, often defy belief. The Florida Office of Film & Entertainment reported that, over a decade, film incentives and a film-related sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. credit created 675,000 jobs, nearly 118,000 of them in 2013 alone. That’s pretty remarkable when you consider that, according to the Bureau of Labor Statistics, 4,098 Floridians worked in film and television production that year.

Of course, these economic development studies try to capture induced employment as well—jobs outside the industry that are nonetheless dependent upon it—but 675,000 jobs? If we’re to believe that, then one in fourteen working Floridians owes his or her job to the state’s film incentives.

The reality is that film incentives create few permanent jobs. According to a Michigan study, the average job runs its course in 23 days. If anything, Massachusetts’ findings were even worse. It makes sense, really: an extra who works a single day counts as a job created. If that extra jumps around to several productions—even if only for stints of a day or two—each role counts as a new job.

Unlike some states, Florida tried to design its program to incentivize in-state employment. The effect, however, is marginal, since productions can easily meet their quotas by hiring extras and bringing on short-term Florida crew.

In Florida as elsewhere, film incentives are responsible for a race-to-the-bottom competition that can make it seem like some states are “winning” something valuable. The unfortunate reality is that states are competing for the opportunity to lose money—taxpayer dollars that could be spend on critical state programs, or used to pay down broad-based tax reductions that could boost long-term economic growth.

My testimony, as prepared, can be found here. More on Florida here.