Capitol Alert

Taxpayers don’t get much when states like California hand tax breaks to Hollywood, study says

States aren’t getting much in return for hundreds of millions of dollars in tax credits they hand to filmmakers and TV show producers, according to a new study from the University of Southern California.

More than 30 states offer Motion Picture Incentive (MPI) programs, “to the tune of $1.7 billion annually to encourage film and television production,” according to a release announcing the study in the journal “State and Local Government Review.”

The study focuses on the top five states that offer film incentives: New York, Louisiana, Georgia, Connecticut and Massachusetts offer between them about 77 percent of all MPI money nationwide, which have cost taxpayers a total of nearly $10 billion since their programs were enacted.

For all that money, the study found that there was “no significant contribution to job growth as a result of MPIs,” according to the statement.”

“This new study should put to rest any notion that motion picture tax incentives may work in some states but not others,” said lead study author Michael Thom, a USC associate professor. “The states investing the most in incentives are not getting the return on investment taxpayers deserve, pure and simple. These incentives cost taxpayers billions of dollars, at a time when that money could be directed to other much needed public services.”

California has offered tax credits to filmmakers since 2009, and in 2015 expanded its film tax credit program from $100 million a year to $330 million a year, according to the Legislative Analyst’s Office.

California in 2018 extended the tax credit program to 2025, with the Motion Picture Association of America saying in a statement that the additional time “helps ensure that California will be home to many more productions, jobs, and local businesses for years to come,” according to The Hollywood Reporter.

State lawmakers sometimes consider steering even more tax credits to the entertainment industry. Gov. Gavin Newsom appeared to endorse the tactic in May when he appeared in a video with the author of a bill that would give tax breaks to films that relocate to California from a state with abortion restrictions.

The video followed news that several states including Alabama and Georgia adopted new laws restricting access to abortion.

“For those of you that have left to do production in states like Georgia, consider the investment there and what it’s promoting, versus investing in your state and what we’re promoting,” Newsom says in the video posted. “This is the moment, come back home.”

Newsom said “we’re going to do more” to embrace the film industry, including the possibility of more film tax incentives for television and movie productions that operate in the state.

That effort would be in vain, according to Thom.

“Even in instances where the study finds an uptick in employment, the jobs created come at a very high cost. States are essentially paying billions of dollars to create a relatively small number of jobs, which isn’t a prudent use of taxpayer money,” Thom said in prepared remarks.

Thom in 2016 was lead author on a study that also challenged the value of tax credits. The study was titled, “Lights, Camera but No Action? Tax and Economic Development Lessons from State Motion Picture Incentive Programs.”

The Motion Picture Association disputed Thom’s findings, issuing a statement in response.

“It is unfortunate that a well-respected academic institution that counts some of the greatest filmmakers, directors, and actors among its alumni, is promoting this fundamentally flawed research. Reputable economists have found that Professor Michael Thom’s previous work had serious deficiencies, and this study is no different,” said MPA Senior Vice President Van Stevenson in a statement.

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