Film Subsidies

New York State Spends $1.4 Million on an Old Movie Theater To Create 6 Jobs

Many subsidies for the film industry cost taxpayers more and create even less.


Caro / Sorge/Newscom

A New York state agency meant to foster economic growth says spending more than $1 million to rebuild an old movie theater in one of the state's richest counties will create a mere six jobs.

Unfortunately, when it comes to subsidizing movies—whether making them or showing them—that's pretty typical.

On Saturday, New York state officials participated in the groundbreaking for the Sag Harbor Cinema Arts Center. The center will reportedly "restore the Sag Harbor Cinema and preserve the showing of independent, foreign and documentary films on the East End of Long Island."

The center is being developed by the nonprofit Sag Harbor Partnership, which pledged $13 million toward the project. However, they aren't the only investors. The Regional Economic Development Council awarded the Hampton theater a $1.4 million grant last December through Empire State Development. The result of that massive bill to the taxpayers? Six jobs, according to the government's own report. That's over $230,000 per job!

This isn't the first instance of Gov. Andrew Cuomo's cronies throwing money at the movie business and getting almost nothing back. Just a few weeks ago, Reason's Nick Gillespie pointed out that New York spent $15 million in 2014 to build a brand new film studio that was supposed to attract the entertainment industry to the Empire State. The studio was then sold to Onondaga County for a hefty sum of one dollar.

New York is hardly the only state engaging in these types of corporate handouts, which often take the shape of tax breaks or direct grants. There are 33 states (plus Puerto Rico and Washington, D.C.) offering some form of taxpayer-funded incentive to encourage film production. Supporters of these incentive programs claim the movies and television shows brought to their states will boost growth, help small production companies, and create jobs for locals. But study after study has shown quite the opposite. These programs do little to boost employment and end up wasting enormous amounts of taxpayer money.

"There's simply no objective evidence that incentives for film and television production create that many permanent jobs, if they create any at all," says Michael Thom, professor of public policy at USC, "the motion picture industry is skilled at convincing the public that something fake is actually real. That skill is not limited to what we see on televisions and in the movies. Sadly, it has spilled over into economic development policy."

Thom's research found no long-term wage growth or job growth created by film incentive programs. He also found that the short-term gains were realized almost exclusively by individuals already involved in the film business.

The idea that these incentives give a helping hand to small production companies is also a myth. In a piece for Reason in 2016, Jared Meyer, senior research fellow at the Foundation for Government Accountability, said that 98 percent of the film tax credit budget in Maryland went to the production of House of Cards and VEEP, hardly small productions that required the assistance of a benevolent state legislature.

In addition, film incentives don't create any revenue for the state. "Almost every other study has found film tax credits generate less than 30 cents for every $1 of spending," according to another study by the conservative Tax Foundation, discounting research paid for by the Motion Picture Association of America and economic development authorities. They also saw that adopting film subsidies simply shifted economic activity, instead of creating real, productive growth.

This is the sort of grave misallocation of resources that happens when governments make investments. Governments are immune to the price signals that dictate entrepreneurs to invest effectively, which means big bucks from the taxpayers, but no bang.

It's not just fiscal conservatives who are opposed to this big budget program. The left-leaning Center on Budget and Policy Priorities found themselves in agreement with their colleagues from across the ideological aisle. "State film subsidies are a wasteful, ineffective, and unfair instrument of economic development," reads their report.

Despite overwhelming evidence of their wasteful nature, film subsidies persist. Like many government programs, subsidizing film production through grants, fancy studios, or tax breaks, is yet another example of corporations in bed with the government.

Thom asserts that in those states that offer film incentives, "the motion picture industry and its labor unions lobby hard against any effort to cut or repeal incentive programs. Their efforts include funding shoddy research studies that policymakers then use to justify keeping the incentives in place." Crony capitalism, plain and simple.

State governments should not be expanding programs that cushion production for film producers with millions of dollars under their belt, who lobby for these incentives even though they clearly don't need them. Netflix, for instance, threatened to leave Maryland if they didn't bump up its incentive program, and even had Kevin Spacey show up at the governor's door, leading to a doubling of the program's budget. The list of big-budget films and television shows living off the taxpayer's wallet goes on: The Avengers, Split, Madam Secretary, all massively successful productions; successful enough to do without government handouts.

In a 2013 article for US News & World Report, Mercatus Center's vice president of policy research Eileen Norcross asked the right questions: "What's so special about film companies? Why not make the rules business-friendly for everyone?" If state legislatures are so keen on attracting businesses, all round tax cuts would be far more effective than handing out selective tax breaks to companies that need them the least in drawing businesses from across the country to invest and develop.