The rah-rah-sis-boom-bah-ers have been out in full force as of late cheerleading for yet another increase in Pennsylvania’s film tax credit. Never mind that the “benefits” are as fictional as most of the motion pictures this industry produces.
In a nutshell, a film production is eligible for a tax credit if its Pennsylvania production expenses are at least 60 percent of the film’s total production expenses.
As the Tribune-Review recently recounted, the Keystone State’s film tax credit went into effect in 2007. It’s now capped at $100 million a year. Some industry lobbyists want to triple that amount. Others advocate for no cap.
And that persistent advocacy always comes with backers tut-tutting critics of such programs — and with grand claims of wondrous economic benefits fueled by multipliers that seem to be too good to be true.
Because they are.
It was just a year ago that Reason magazine, citing various studies, concluded that film tax credit programs typically are full of proclaimed sizzle but not very much steak.
To wit, Reason recounts an exhaustive study of New York’s film tax credit program that concluded the $700 million annual credit “is at best a break-even proposition and more likely a net cost” for the Empire State.
“Rather than a lucrative financial investment, the credit ‘does not provide a positive return to the state in terms of direct state taxes revenues, with $0.15 in direct tax revenue and $0.31 for all combined state tax revenue for every $1.00 invested,’” wrote reporter Joe Lancaster, referencing a study by PFM Group Consulting.
And in Georgia, whose uncapped film tax credit program recently was touted in one media account as the “brightest new star,” Reason notes that “auditors found that [it] only generates $0.19 for every dollar spent on its tax credits, which works out to a $160,000 taxpayer loss for each job the credit creates.”
In 2018, a Pennsylvania Independent Fiscal Office (IFO) analysis found the Keystone State’s film tax credit generated a meager “return” of 13.1 cents for every tax credit dollar.
Last summer, Michael Thom, an associate professor of public policy at the University of Southern California, told the Post-Gazette that, generally, film tax credit programs offer “no employment impact” and are “a large drain” from a state’s budget “that will have to be made up with spending cuts, tax increases or both.”
“The only thing [film tax credits] seem to bolster are studio profits and lobbyists’ careers,’” Thom told the P-G. “We live in the ‘follow-the-science’ era. Pennsylvania policymakers should, too!”
For as a highly regarded University of Pennsylvania Journal of Business Law study concluded:
“Any state that believes film incentives are an effective means of ‘creating’ a new industry and rationalizes its incentives as investments that will pay off one day is delusional.”
Lights? Camera? Action?
Please.
And lest we forget those tut-tutting critics of those who have the audacity to question all the supposed glories of film tax credits, the same 2014 Penn Journal of Business Law study had a blunt retort that is too good not to share:
“The harsh reality is that time and time again, film incentives have been shown to benefit out-of-state business and residents at outrageously disproportionate levels.
“More outrageous is that, in the face of this reality, film backers continue to make misleading claims about the value of film incentives and have the temerity to discredit study after study that proves everything backers have said about these programs to be false.”
Additionally, the journal reminded that while it is true that film incentives induce new productions, resulting in private spending, “the revenue generated from this new economic activity is never enough to: (1) make more money than the cost of the incentive (revenue positive); (2) generate enough revenue to reach a break-even point for the incentive (revenue neutral); or (3) generate enough revenue to offset a significant portion (50 percent or more) of the cost.”
“The state is paying considerable amounts of money to lure film production, which will then spend even more money, ideally in that state. The reality is, however, that the spending is not happening. Even if it were, given the present largesse of film incentives in the U.S., the result will almost always be revenue negative.”
Sounds like a wrap to us.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
