Nevada’s legislature voted this week to add a film and television subsidy program of $20 million per year. Any individual production can tap a maximum of $6 million per year, and 60 percent of expenses must be incurred in Nevada.
The bill’s language and the debate describe it as a 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. incentive, but that’s hard to do for Nevada because they have neither an individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. nor a 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. . Qualified film and television productions will receive transferable certificates that they can use to reduce any state tax liability, or sell to others to reduce their state tax liabilities. It may bear the name “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. ” but it operates essentially as direct payments from taxpayers to film productions.
Perhaps it was the persuasiveness of Nicolas Cage, or anxiety over California’s relatively new (2009) $100-million-per-year film incentive program, or general concern about high unemployment and uncertain economic prospects. Whatever the reason for passage, every independent analysis of film incentive programs has found that they generate less than 30 cents on the dollar in tax revenue for every $1 paid out by state governments. 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. 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.
Ultimately, there are better uses for scarce dollars that to subsidize one of America’s most profitable industries. More about film incentives here.
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