Film Subsidies

Deceptive Data Make Georgia's Film Tax Credit Program Look Less Wasteful

Economists debunk the state government's claims about the size of the film industry.

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Georgia's film industry gets some big tax credits from the state government—$800 million's worth in 2018. Both the government and the movie production companies love to claim that these subsidies bring a huge return. The eye-popping figure you usually see claims that the credits produced $9.5 billion in economic benefits in 2018 alone.

But that number is almost certaily wrong. It includes less than $3 billion in direct spending from the film industry. The rest is supposed to come from the multiplier effect, in which each dollar spent creates more spending throughout the economy. And economists have some serious questions about how valid that estimate is.

J.C. Bradbury of Kennesaw State University has argued that using a more realistic multiplier, the film industry generates, at most, $4.2 billion in annual economic output. Similarly, Bruce Seaman of Georgia State University thinks the film industry is responsible for just $6 billion in economic benefits. The state Department of Economic Development estimates that for every dollar the film industry spends in the state, overall spending increases by $3.57; Seaman argues the real value is closer to $1.87.  

Georgia isn't the only state to inflate the benefits of film production. 

One especially dubious study of film tax credits, prepared for the New Mexico State Film Office, claimed that tourism alone driven by the filming of No Country for Old Men, 3:10 to Yuma, Indiana Jones and the Kingdom of the Crystal Skull, and Wild Hogs (a forgettable 2007 comedy starring Tim Allen, Martin Lawrence, William H. Macy, and John Travolta as an over-the-hill biker gang) generated more than $100 million in income for state residents over a four-year span.

In other words, a lot of people supposedly wanted to see where Indiana Jones survived a nuclear blast by hiding in a fridge or where John Travolta dressed like this:

Color me skeptical.

Most research on film tax credits show that they don't have much of an impact on economic growth. A National Bureau of Economic Research study from this June found that film subsidies only have a marginal impact on where TV series are filmed, and that they do not increase feature film location, employment, economic growth, or wages. Studies from Michigan and Massachusetts have found that the average length of a job credited to a film tax incentive program lasts less than a month. 

Subsidies can even hurt a state economyby shifting economic resources away from productive industries and toward politically connected ones. If it weren't for the tax subsidies, the money that Georgia directs to film production could instead go to reducing taxes broadly, allowing the people of the state to decide which businesses to support. In the meantime, there's a good chance production companies would come even without the subsidies. 

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  1. Tax credits are not subsidies.

    If a state decides to tax a film production company less than a widget maker, that is not a subsidy. To think otherwise, is progressive.

    1. Exactly. And the excuse given by the article, “If they didn’t reduce these people’s taxes, then “the money that Georgia directs” — which is money that was in private hands anyway — “could intead go to” reduce other people’s taxes is ludicrous. It’s the statist idea that tax cuts need to be “financed”. But just because the state does not forego taking money from some people doesn’t mean they will forego taking it from others.

    2. OK, crony capitalism then. Feel better?

  2. Georgia is being hurt, alright, not by losing money (this whole article takes an incredibly dumb AOC view of tax revenue), but by importing so many Progtards from the Left Coast to turn the state Purple

  3. There were 455 TV and movie projects filmed in Georgia in 2018.

    Tyler Perry has his own studio in Georgia. Marvel has set up shop at Pinewood Studios.

    The Motion Picture Association of America says the industry generated 92,100 jobs and nearly $4.6 billion in total wages in Georgia and that more than 300 new businesses have relocated or expanded here to support the industry.
    AJC- film projects in Georgia

    The tax credits seem to have paid for themselves. Georgia gets revenue from film projects, employee pay, and spending. Georgia gives the movie studio tax credits. Georgia would have never gotten any taxes from production companies if they didnt do projects in Georgia.

  4. I’m surprised you didn’t say “Color me purple” in an article about movies.

  5. dead babies at will > revenue. Killed. In. Georgia.

  6. Why the state of Georgia tries so hard to get socialists to come into the state has always been a mystery to me.

    1. Maybe that’s the trick. The legislators think they are fooling the socialists and it puts a big expensive grin on their faces. There’s probably back slapping all over the smoke filled rooms as they delude each other.

    2. Actually it’s pretty clever, since they don’t end up moving to Georgia. They just pop in to work and spend some money while there, and maintain their permanent residence elsewhere. Georgia gets Hollywood’s money without Hollywood’s politics.

    3. Georgia gets money from all the crappy film projects and good film projects. The production employees spend money here but most dont live here, so it mitigates their shitty politics.

  7. libertarians generally love tax credits. steal less from the productive sector, lure in new jobs. what’s the problem?

    1. +100

  8. The garage floor epoxy has worked wonders in this new period.

  9. Well, if we can’t have politicians in office that are willing to have the taxpayers pay for their cronies bills, then why do we have politicians in the first place?
    Did anyone ever think about that?

  10. But where would they have filmed the Walking Dead if they weren’t being subsidized by taxing peach farmers more than they would have been???

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