The Case Against Film Subsidies

After attending a recent hearing of the New Jersey Assembly's Commerce and Economic Development Committee, the Manhattan Institute's Josh Barro explains why Gov. Chris Christie was wise to kill off the Garden State's subsidy program for movie and television productions:

Industry lobbyists turned out in force to explain why giving money to their clients is essential for the state's economy. A representative from NBC/Universal asserted that the firm moved production of Law & Order: SVU to New York for tax reasons, and might not even have cancelled the medical drama Mercy if New Jersey had maintained its subsidy program. Unlike New Jersey, 45 states currently offer some kind of film production incentive….

Taking a step back, any industry would be thrilled to face a tax rate of negative 20% on gross expenses, as was the case with New Jersey's suspended credit program. They'd be even more keen on the 35% offered in New York City or the 42% on the table in Michigan. It is no surprise that these programs are highly successful at drawing in film productions, at least as long as they remain the most generous in the neighborhood. If a state offered such generous subsidies for rubber ducky manufacturing instead of filmmaking, it would see a proliferation of bath toy factories instead of soundstages.

Yet, this is not the approach we take to economic development in most industries, because it is unsustainable. Handing out huge subsidies costs a huge amount of money.

Read the whole thing here.