With all due apologies to The Beatles, “It’s a loser. It’s a loser. And it’s not what it appears to be.”
We refer to the long running scam that are “film tax credits” that many a state, Pennsylvania included, hand out to the motion picture industry to shoot Hollywood movies and purchase a varying percentage of goods and services in this state and that state in return for tax breaks.
We’ve long documented how what film industry cheerleaders continue to call an “investment” in Pennsylvania is, in reality, a consistent money-loser.
Yet those same rah-rah-sis-boom-bah-ers (they know who they are and how well they’ve snookered too many uncritical media-types into believing their spiel) continue to push for a capless film tax credit (now capped at $100 million for fiscal 2025-26 in the Keystone State), claimed to be “necessary” to compete with other higher-capped or no-cap states.
Talk about about a race to the bottom. Talk about the manifest failure of government-funded industrial policy being writ large. As both The Wall Street Journal and Reason Magazine concluded recently, taking a deep dive into the man-made disaster that has been the film tax credit program in Georgia.
From The Journal last month:
“[Georgia] hemorrhages money on the credit. Auditors estimated that every dollar the state awarded studios— $5.2 billion between 2015 and 2022—returned only 19 cents in tax revenue, an 81 percent loss. Yet lawmakers have thrown still more money at filmmakers with the state’s post-production tax incentive, reinstating benefits to films not even shot in Georgia but edited” there.
But film production has dropped precipitously in The Peach State because of soaring labor costs of union film production workers and lower labor costs elsewhere, especially abroad. It’s further proof of how organized labor will suckle the taxpayer teats dry — even if it means its own demise.
And, again, Pennsylvania’s film tax credit cheer squad wants a capless credit?
Further from The Journal:
“Some Georgia filmmakers hope for a federal tax incentive [as proposed by President Donald Trump], but that would be fiscally irresponsible and prone to being outdone by other nations. Federal funding would also invite government interference.”
Ah, industrial policy writ even larger will solve the “problem,” right?
Wrong.
As Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, recently reminded in Reason Magazine, film tax credits “are either a subsidy to production companies to do what they would have done anyway or they are bribes to highly visible, highly mobile capital that can leave as quickly as it arrives. Georgia was the latter.”
And Georgia is not an outlier, de Rugy stresses. “This same pattern has played out repeatedly in states and cities that have tried to buy a film industry. This includes California, where ever-larger tax credits have been justified as ‘retention’ policies rather than genuine development, at rising fiscal cost and with weak evidence of durable, net economic gains.”
The bottom line question for film tax credits here, there and everywhere should not be how much the pool of taxpayer “incentives” should be, capped or capless, but if they should exist at all.
And that answer must be a resounding “NO!”
For as George Mason scholar de Rugy concludes, no matter it’s whether subsidizing computer chips, automobiles or film production, “industrial policy tries to engineer outcomes while ignoring processes.”
“It assumes that political favor can substitute for market incentives. That innovation and customer demand won’t suffer. That shielding firms from competition will make them stronger.
“Instead, we get fragile industries that are dependent on even more political support,” de Rugy says.
It’s the never-ending government intervention that constantly must be schemed to cover up the failure – the lie, really – of each prior government intervention.
And, typically, that guarantees failure, we are forced to remind.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
