Nevada Film Tax Credit Proposal Dead

June 17, 2011

Nevada, one of the six states that never adopted any movie production incentives, has just been spared from a proposed film tax credit.

The state hasn’t needed the incentives to keep its local film industry because of its own natural advantages, mainly: no corporate or individual income tax, and Vegas. But the recent spread of the film tax incentives trend in other states has been putting pressure on the local industry to relocate.

The efforts to pass a bill failed because of disagreements over specifics and because more pressing budget concerns got in the way. In the end, the bill was left off the table as the legislative session ended.

Legislator Marilyn Kirkpatrick, author of the bill, changed it to bring the credit down from 25% to 15%. She says her decision to do so was motivated by a recent Tax Foundation report on the failure of film tax credits to fulfill their promises of promoting economic growth and increasing tax revenue. An amendment to the bill bringing the credit back up to 25% resulted in delays that doomed the bill as the legislative session expired.

Film tax credits are bad tax policy (see this Tax Foundation report for a complete analysis of movie production incentives). They artificially favor the film industry over other private industries, creating undesirable distortions in the economy. Further, they encourage rent-seeking and reward companies for their political connections, not for how well they satisfy their customers. Governments seeking to promote economic growth should instead lower taxes across the board to encourage private enterprise in general.

Hopefully, Nevada’s failure to jump on the bandwagon will provide further momentum for states to abandon their ill-conceived film tax incentive policies.

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