Keystone State Can’t Afford Film Tax Credits

August 13, 2010

Pennsylvania officials are bragging about the state’s $60 million film tax credit program at a time when Gov. Ed Rendell is pushing a 1.9% across-the-board cut to fill a $282 million gap in the budget (after accounting for additional federal stimulus aid). Tough fiscal times should force lawmakers in the 44 states with movie production incentives (28 with film tax credits) to reevaluate these tax expenditures as they reprioritize spending. But even in good economic times, the merits of film tax credits should be questioned:

A study published by the Tax Foundation earlier this year shows that the jobs “created” by movie production are often temporary in nature, with limited upward mobility. In other cases, jobs are simply shifted from elsewhere in the state.

The 2009 study commissioned by Pennsylvania’s Legislative Budget and Finance Committee estimated a “net fiscal gain” of $4.5 million from the state’s film tax credit program — but only by assuming that any business interacting with the film industry would not have existed without the credit.

States hardly recoup the cost of the film incentive itself, let alone raise additional tax revenue from production-related activities. A study from Louisiana’s Legislative Fiscal Office found that state — the first to offer film incentives — loses 83 cents for every dollar it spends on movie production incentives.

More on film tax credits.

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