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. Foundation Fiscal Fact No. 272
Film 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 fail to live up to their promises to encourage economic growth overall and to raise tax revenue. States claim these incentives create jobs, but the jobs created are mostly temporary positions, often transplanted from other states. Furthermore, the competition among states transfers a large portion of potential gains to the movie industry, not to local businesses or state coffers.
In 2010, a record 40 states offered $1.4 billion in film and television tax incentives. All told, states have provided nearly $6 billion for such programs over the past decade. 2010 will likely stand as the peak year, since many governors and legislators are ending their programs, preferring to use the money for other priorities or leave it with taxpayers. Recent eliminations or suspensions:
- Arizona ended its program after 2010 and efforts to renew it have not advanced.[1]
- Arkansas appropriated no funds for its program for 2011.
- Idaho appropriated no funds for its program for 2011.
- Iowa suspended its program in 2009 after widespread fraud and abuse was discovered.[2] Another film producer was sentenced to 10 years in prison this week related to that scandal.[3]
- Kansas has suspended its program.[4]
- Maine appropriated no funds for its program for 2011.
- New Jersey suspended its program,[5] although some legislators are pushing for its reinstatement.[6]
- Washington legislators just dropped their program as part of a budget deal.[7]
That will bring the number of states with programs down to 35 as of next year. Additionally, existing programs are being pared back or challenged:
- Alaska legislators may not renew their program.[8]
- Connecticut reduced the generosity of its credit.[9]
- Georgia‘s tax review commission recommended eliminating the program.[10]
- Hawaii legislators rejected an effort to expand their program.[11]
- Michigan will greatly reduce its film tax credit as part of a business tax overhaul. Michigan’s program was among the most generous, providing a 42% subsidy for qualified film and television productions. Proponents are pushing for its reinstatement but at a less generous level.[12] Gov. Rick Snyder (R) had called for ending the program altogether.[13]
- Missouri‘s tax credit review commission recommended ending the program.[14]
- New Mexico capped its program,[15] compromising with Gov. Susanna Martinez (R) who had sought to scale back or end it.[16]
- Rhode Island Gov. Lincoln Chaffee (I) is seeking to end that state’s program.[17]
- Wisconsin appropriated just $500,000 for its program after concluding that providing tax credits to even a blockbuster production would likely have a negative fiscal impact.[18]
On the other hand, some states are betting more on these programs:
- California‘s new film tax credit faces some debate over its renewal, but it will likely continue.[19]
- Minnesota Gov. Mark Dayton (DFL) put money for their “Snowbate” program back in the budget,[20] after his predecessor Gov. Tim Pawlenty (R) sought to end the program.[21]
- Some Nevada legislators are pushing to create a film incentive program, which will be tough since the state has no corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. to give a credit from.[22]
- After early indications that he might challenge the program, Ohio Gov. John Kasich (R) sought no changes.[23]
- Pennsylvania Gov. Tom Corbett (R) worked to save the film tax credit from budget cuts.[24]
- Utah made its film tax credit more generous.[25]
- Virginia Gov. Bob McDonnell (R) worked with legislators to add a new film tax credit.[26]
- Wyoming Gov. Matt Mead (R) signed a five-year extension of that state’s program.[27]
In short, while film incentive programs were once universally applauded as great economic development tools and tourism boosters, their merits are now being rigorously debated. (Check out this debate that the Midwest is talking about this week.)[28] At a minimum, film incentive programs should be required to report how many dollars in incentives were provided per each Full-Time Equivalent (FTE) job created by qualified productions. Programs should be reviewed periodically for their effectiveness by legislative oversight or a third party.
For more information, see our full report on this topic, “Movie Production Incentives & Film Tax Credits: Blockbuster Support for Lackluster Policy.”[29]
| Year | States with Film Incentive Program | Incentive Amounts Offered |
| 1999 and earlier | 4 | $2 million |
| 2000 | 4 | $3 million |
| 2001 | 4 | $1 million |
| 2002 | 5 | $1 million |
| 2003 | 5 | $2 million |
| 2004 | 9 | $68 million |
| 2005 | 15 | $129 million |
| 2006 | 24 | $369 million |
| 2007 | 33 | $489 million |
| 2008 | 35 | $807 million |
| 2009 | 40 | $1.247 billion |
| 2010 | 40 | $1.396 billion |
| 2011 | 37 | $1.299 billion |
Source: Tax Foundation calculations.
[1] David Madrid, “Arizona Film Projects in Danger if Tax Incentive Expires,” The Arizona Republic, May 26, 2010, http://www.azcentral.com/arizonarepublic/local/articles/2010/05/26/20100526arizona-film-tax-credit.html.
[2] Richard Verrier, “Iowa Film Tax Credit Program Racked by Scandal,” Los Angeles Times, January 19, 2011, http://articles.latimes.com/2011/jan/19/business/la-fi-ct-onlocation-20110119.
[3] Joe Barrett, “Tax-Credit Fraud Puts Filmmaker in Prison,” Wall Street Journal, May 18, 2011, http://online.wsj.com/article/SB10001424052748704281504576329721447700398.html?mod=googlenews_wsj.
[4] “Film Production Credit,” Kansas Department of Revenue, last update October 28, 2010, http://www.ksrevenue.org/taxcredits-film.htm.
[5] Paul Tyahla, “Roll Closing Credits On New Jersey’s Film Subsidy,” Common Sense Institute of New Jersey, March 3, 2011, http://www.csinj.org/2011/03/roll-final-credits-on-film-subsidy/.
[6] Associated Press, “N.J. Assembly to Vote on Bill Reinstating Tax Credit for Film Industry,” NJ.com, January 9, 2011, http://www.nj.com/news/index.ssf/2011/01/nj_assembly_to_vote_on_bill_re_1.html.
[7] Jordan Schrader, “Lawmakers Kill Film, Newspaper Tax Breaks in Waning Hours,” Tacoma News Tribune, May 27, 2011, http://www.thenewstribune.com/2011/05/27/1682224/lawmakers-kill-3-industries-tax.html.
[8] Becky Bohrer, “Alaska Film Tax Credit Program Faces Doubts in House,” Anchorage Daily News, April 14, 2011, http://www.adn.com/2011/04/14/1809849/film-tax-credit-program-faces.html.
[9] Brian Lockhart, “Budget Tightens Film Credits,” Danbury News Times, May 9, 2011, http://www.newstimes.com/news/article/Budget-tightens-film-credits-1371324.php.
[10] Chris Joyner, “Film Industry Pushes to Keep Georgia Tax Credit,” Atlanta Journal-Constitution, March 1, 2011, http://www.ajc.com/news/georgia-politics-elections/film-industry-pushes-to-857482.html.
[11] Brian Perry, “Lawmakers Sorry Film Tax Credit on Cutting Room Floor,” Maui News, May 14, 2011, http://www.mauinews.com/page/content.detail/id/549416/Lawmakers-sorry-film-tax-credit-on-cutting-room-floor.html?nav=10.
[12] Christopher Brennan, “Effort to Keep Movie Subsidy is Heating Up,” Livingston Daily, May 25, 2011, http://www.livingstondaily.com/article/20110525/NEWS01/105250324/Effort-keep-movie-subsidy-heating-up.
[13] Josh Brown, “Two GOP Governors Plan to Spare Film Tax Credits,” Washington Times, March 20, 2011, http://www.washingtontimes.com/news/2011/mar/20/two-gop-governors-plan-to-spare-film-tax-credits/.
[14] Kelsey Volkmann, “Tax Credit Cuts Would Save Missouri $220M,” St. Louis Business Journal, November 30, 2010, http://www.bizjournals.com/stlouis/news/2010/11/30/missouri-tax-credit-commission-to-make.html.
[15] “$45 Million Cap on New Mexico Film Credit May Help Industry, Not Kill It,” Runaway Production Research, March 7, 2011, http://www.stop-runaway-production.com/2011/03/07/satistics-show-45-million-new-mexico-film-incentive-cap-may-help-not-kill-industry/.
[16] “Susana Martinez’s Proposal to Scale Back Film Tax Incentives,” KRQE News, New Mexico Film, Photography and Music Network, January 12, 2011, http://www.nmseen.us/index.php?do=/Viber/blog/susana-martinez-s-proposal-to-scale-back-film-tax-incentives/.
[17] David Klepper, “Filmmakers Urge RI Not to End Film Tax Credit,” Bloomberg Businessweek, March 25, 2011, http://www.businessweek.com/ap/financialnews/D9M6B5O00.htm.
[18] Jack Craver, “Is the Wisconsin Film Tax Credit Worth It?” Isthmus Daily Page, May 5, 2011, http://www.thedailypage.com/daily/article.php?article=33419.
[19] Joseph Henchman, “FilmWorks Blog Criticizes Tax Foundation on Industry’s Dependence on Film Tax Credits,” Tax Foundation Tax Policy Blog, April 26, 2011, http://www.taxfoundation.org/legacy/show/27240.html.
[20] Minnesota Management and Budget, “Governor’s Recommendations: Economic Development,” http://www.mmb.state.mn.us/doc/budget/narratives/gov11/explore.pdf.
[21] Frank Jossi, “That’s a Wrap: Final ‘Snowbate’ Film Ends Shooting,” All Business Finance & Commerce, Mar. 23, 2010, http://www.allbusiness.com/government/government-bodies-offices-legislative/14205508-1.html.
[22] Joe Schoenmann, “Assembly Movie Bill in Danger of Hitting Cutting Room Floor,” Las Vegas Sun, May 12, 2011, http://www.lasvegassun.com/news/2011/may/12/movie-bill-danger-hitting-legislatures-cutting-roo/.
[23] Dave Larsen, “Arts Keep 80% of Funding; Film Tax Credits for Movies Stay,” Dayton Daily News, March 16, 2011, http://www.daytondailynews.com/news/ohio-news/arts-keep-80-of-funding-film-tax-credits-for-movies-stay–1109011.html.
[24] “Film Tax Credit Saved in Deep Budget Cuts,” KDKA Pittsburgh, March 9, 2011, http://pittsburgh.cbslocal.com/2011/03/09/pennsylvania-film-tax-credit-saved/.
[25] Sean P. Means, “Utah Raises Its Motion-Picture Tax Incentive,” The Salt Lake Tribune Movie Cricket Blog, March 29, 2011, http://www.sltrib.com/sltrib/blogsmoviecricket/51522539-66/utah-incentive-film-motion.html.csp.
[26] “McDonnell touts film incentives,” HamptonRoads.com, June 2010, http://hamptonroads.com/2010/06/mcdonnell-touts-film-incentives.
[27] “Wyoming Film Incentives Extended,” Wyoming Film Office Blog, February 17, 2011, http://filmwyoming.blogspot.com/2011/02/wyoming-film-incentives-extended.html.
[28] “Beckmann vs. Albom Slugfest,” The Michigan View, May 18, 2011, http://www.detnews.com/article/20110518/MIVIEW/105180360/1467/opinion01/Beckmann-vs.-Albom-slugfest.
[29] Will Luther, “Movie Production Incentives & Film Tax Credits: Blockbuster Support for Lackluster Policy,” Tax Foundation Special Report No. 173, January 14, 2010, http://www.taxfoundation.org/legacy/show/25706.html.
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