The “learned economists” in Harrisburg appear to be setting the stage yet again to push for an uncapped, unlimited film tax credit. And they’re using Georgia’s unlimited credit as proof-positive that it’s a great idea.
Sorry, but the facts say otherwise.
Pennsylvania’s Film Tax Credit Program offers a 25 percent tax credit to productions that spend at least 60 percent of their total budget in the state. And while its staunch advocates long have sung the credit’s praises for the supposed multimillion-dollar economic benefits it bestows on the commonwealth and workers, the state’s Independent Fiscal Office (IFO) long has questioned the program’s administration, return on investment and overall economic benefits.
As have myriad public policy experts, including those at the Allegheny Institute.
And it was just two years ago, in a long Post-Gazette story, that Michael Thom, an associate professor at the University of Southern California’s School of Public Policy, thoroughly skewered the notion of grand public benefits from film tax credits.
Thom told the P-G that, generally, such programs offer “no employment impact” and serve as “a large drain from the state’s budget that will have to be made up with spending cuts, tax increases or both.”
“The only thing they seem to bolster are studio profits and lobbyists’ careers,’” Thom said. “We live in the ‘follow the science’ era. Pennsylvania policymakers should, too!”
But, still, the cheerleading for the Keystone State’s film tax credit persists. And the pom-pomers point to Georgia’s uncapped credit program as grand success worth emulating.
Never mind, as Emory University researchers have documented, that the Peach State film tax credit of 30 percent offers a miniscule return on investment – 19 cents for every dollar granted. Put another way, that’s an 81 percent loss on “investment.”
Additionally, Emory researchers found that most of the Georgia credits are sold to unrelated third parties at a discount, not used by production companies. Little or no direct tax benefits remain in the state.
And The Wall Street Journal reports that the film tax credit has served to inflate local union wages and crew budgets, which has led major production studios to seek cheaper locales.
It was just this past May that Marc Hyden, senior director of state government affairs at the R Street Institute, used an Atlanta Journal-Constitution commentary to drive the point home of the fallacy of saying such tax credits have fueled an economic renaissance in Georgia:
“Tax credits have increased filming in Georgia, which is not surprising,” the newspaper opined, then wryly noted that “if the state subsidized 30 percent of the cost of manufacturing toilets, Georgia would be the toilet capital of the world. The question is if there are better uses for [the lost tax revenue].”
And the answer is, “Of course there are.”
Concluded economist Robert Tannewald in a 2010 study:
“Like a Hollywood fantasy, claims that tax subsidies for film and TV productions — which nearly every state has adopted in recent years — are cost-effective tools of job and income creation are more fiction than fact. In the harsh light of reality, film subsidies offer little bang for the buck.”
Among his specific findings:
State film subsidies are costly to states and generous to movie producers; subsidies reward companies for production that they might have done anyway; the best jobs go to non-residents; subsidies don’t pay for themselves; no state can win the film subsidy war – as the Allegheny Institute’s Jake Haulk has previously pointed out — and supporters of subsidies rely on flawed studies
Intellectual dishonesty runs amok in the film tax credit debate.
“State governments cannot afford to fritter away scarce public funds on film subsidies, or, for that matter, any other wasteful tax break,” Tannewald concludes.
So, why do so many Pennsylvania legislators continue to push for increased frittering?
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
