Free Minds & Free Markets

No Matter Who Wins at the Oscars, Taxpayers Lose on Film Subsidies

Big screen and small get big benefits at taxpayer expense.

Sunday night brings the 89th Academy Awards, and many are wondering what film will take home the Oscar for Best Picture. No matter what film wins, one group of people should be thanked during the acceptance speech—taxpayers.

Film is a heavily subsidized industry, and the majority of states have tax incentive programs that lower the cost of production. These tax credits are determined by production costs, not profits, and many credits are transferrable or refundable. When a film’s tax liabilities are below its allotted refundable credits, taxpayers end up directly paying film companies the difference.

The Big Short, one of this year’s nominees, cost $28 million to produce and was filmed in California, Nevada, and Louisiana. All three states have film tax credit programs, but Louisiana’s 40 percent partially-transferable credit is the largest. The film's producers made a movie about Wall Street greed, but they clearly had no problem making taxpayers pay for their production costs. 

New York’s fully-refundable 30 percent film tax credit is the most generous in the nation, with an annual limit of $420 million. Brooklyn and Bridge of Spies, two of this year’s nominees, were filmed in New York, and their budgets were $12 million and $40 million, respectively.

States are starting to realize that the economic benefits of film tax credits are pure fantasy, like some movie plots. In 2012, 40 states offered tax incentives, at a total cost of $1.4 billion, but since then some states have decided that maintaining roads, funding schools, staffing police departments, and letting residents keep more income are better uses of funds. Since last year’s Oscars, Alaska, Michigan, and Illinois all ended their film tax credit programs. (See my testimony for the Alaska Senate on the false promise of film tax credits here).

In contrast, California tripled its non-refundable film tax credit budget to $330 million in an effort to lure more film production back to Hollywood.

It is not only Oscar-nominated movies that receive sweetheart tax deals. Television shows, including HBO’s VEEP and Netflix’s House of Cards, are two examples.

When Maryland did not increase its fully-refundable film tax incentive program in 2014, Netflix executives went all Frank Underwood on former governor Martin O’Malley and threatened to leave the state. Political pressure, including a Kevin Spacey visit to Annapolis, convinced Maryland to raid other funds in order to double its film tax credit budget to $15 million. This does not include the $4 million in annual lost revenue from sales tax exemptions for film production companies.

Even though film tax credits are often sold as a way to help small producers, 98 percent of Maryland’s film tax credit budget over the last three years has been taken up by House of Cards and VEEP. The increased tourism argument that film tax credit proponents constantly use clearly does not apply for two shows that are set in Washington, D.C. Similarly, no one thinks of Louisiana while they are watching The Big Short.

Maryland’s handouts were still not enough to convince HBO executives to keep filming VEEP in Maryland. VEEP’s production moved to California after the state offered the show a $6.5 million tax credit.

The Maryland Department of Legislative Services found that the state’s film tax incentive program only returns 6 cents for every dollar spent. While this return is particularly poor, the best return in any state is still less than 30 cents on the dollar.

Jobs in the film industry are highly skilled and mobile, which means they do not create lasting economic benefits. If another state rolls out an even more generous tax credit, film production can simply pack up and leave for another soundstage. States that decide to shower the film industry with taxpayer funds are in a race to the bottom, as no credit is high enough to satisfy Hollywood executives.

Maryland’s experience of losing film productions and wasting taxpayer dollars on its program is not unique. Every independent study of film tax credits have found that the programs come nowhere close to paying for themselves. But this reality has not stopped proponents from making fanciful predictions. The Maryland Film Industry Coalition—a group dedicated to promoting the film industry—claims that each dollar in tax credits leads to $1.03 in tax revenue.

The Tax Foundation’s Joseph Henchman points out that if these fanciful projections were taken seriously, the United States could pay off its national debt by simply giving the film industry $1 trillion. One study that was funded by the Motion Picture Association of American assumes that every dollar in tax credits creates $17.75 in economic activity, which leads to $1.88 in new tax revenue for the state. These claims are less realistic than the science-fiction films the credits support.

Film tax credit programs do not pay for themselves. They do not create long-term jobs, nor do they have tourism benefits. All film tax incentives do is provide opportunities for politicians to rub elbows with movie stars.

With the hundreds of millions of dollars that taxpayers gift the film industry each year, perhaps it is time for the Academy Awards to create an Oscar for Best Tax Break. If nothing else, taxpayers at least deserve a shout-out during Sunday’s award ceremony.

Jared Meyer is a fellow at Economics21 at the Manhattan Institute for Policy Research. You can follow him on Twitter here.

[Correction: This article originally stated that The Martian was filmed in Louisiana. It was not. This piece has been corrected to refer to The Big Short, which was filmed in the state, instead.]

Photo Credit: 20th Century Fox

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  • dchang0||

    This hypocrisy is one of the worst things about Hollywood leftists: they preach higher taxes on everyone, especially the rich, and then proceed to help themselves to millions of dollars in tax subsidies for projects that would not be profitable or sustainable in any way without said subsidies. If they really cared about the poor, they would eschew any tax credits and pay their literal "fair share" (other taxpayers don't get such generous tax credits--is that fair?) so that the welfare state gets as much tax revenue as possible (the leftist solution to poverty).

  • The Last American Hero||

    And the big names would take huge paycuts so that the wage gap between the guy holding the boom mike and George Clooney wasn't so egregious.

  • Matte Object||

    New York's film subsidy program was the largest in the nation until last year, when Georgia's film subsidies hit $504m, or roughly 2% of the state budget.

    Georgia does not cap it's film incentives and refunds 30% of the total cost of production to the Hollywood studios.

    Film subsidies dwarf the subsidies given to professional sports teams, but nobody talks about them because the news media is owned by the very same entertainment corporations that are receiving billions in subsidies from taxpayers in the US and abroad.

  • Ron||

    refunds on production cost is one reason why movies cost so much to make. if your offered a refund no reason not to pile on the made up expenses.

  • Matte Object||

    Oh, exactly.

    Hollywood's business model is to inflate apparent expenses in order to reduce taxable profits, it's why movies like Avatar& Star Wars lose money on paper.

    Now they have an extra source of income in state subsidies on those expenses, there's no limit to the amount of money they can make disappear.

  • Sevo||

    And here we thought the frogs were idiotic for subsidizing 'French culture'!

  • Matte Object||

    They wanted Luc Besson to film Valerian in France so badly, they dropped "French language" from the requirements for their film subsidy cultural test - the producers were threatening to shoot in Hungary unless France could be "more competitive" (which is film subsidy speak for "we want more free money").

    (EU countries aren't supposed to subsidize industry at each others expense, but exceptions are made for arts & culture, so each country has a shambolic "cultural test" for films they want to subsidize. The test is so ridiculously lax that films like Star Wars, Batman & the Avengers qualify as "culturally British" for subsidy purposes and obviously the French test doesn't even bother with "being in French' as a requirement now).

  • kbolino||

    EU countries aren't supposed to subsidize industry at each others expense

    Is this a joke? Does anyone actually believe this?

  • Citizen X||

    This is completely leaving aside all the billions that U.S. taxpayers have spent trying to rescue Matt Damon from places.

  • Col. Chestbridge||

    I don't know why we keep sending him on missions. He doesn't even *try* to kill Hitler.

  • Hank Phillips||

    Matt Damon kill Hitler? Matt is the most devout Socialist in showbiz!

  • ||

    If he hadn't been rescued from that janitorial job in the first place, we'd all be in a better world. We'd also be free of Ben Affleck, so that would be another major plus.

  • The Last American Hero||

    I was against film subsidies, but without those subsidies and Matt Damon, we never would have been able to put people on Mars.

  • Bird Person||


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  • Hank Phillips||

    Can't the FBI do something about this spam?

  • Eternal Blue Sky||

    "Television shows, including HBO’s VEEP and Netflix’s House of Cards, are two examples."

    Heh. Both at the bizarre forming of this sentence ("Television shows are two examples" doesn't make sense) and at the fact that apparently the two most notable abusers are shows about shady politics.

  • ||

    I'm gonna have to tax credit the shit out of this

  • CE||

    +1 potato coated with Vicodin.

  • CE||

    Sounds like the taxpayers won already, since some taxpayers got to avoid being taxed. Loopholes good. More loopholes p,lease.

  • Matte Object||

    These aren't tax cuts.

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  • Brad K||

    Ive been hearing this rant for years now, and Im sick of it.
    What I want explained, is why everyone thinks that just because the film/entertianment industry gets tax incentives, its the end of world. And why is there a complaint about the states offering the incentives to compete with other countries like Canada which has taken thousands of jobs and artist from the USA. I dont have a problem working in another state, I have problems with going to Canada and or any other country to do what I do as a career. I have problems with Canada, India, China, Bulgaria, etc, taking the creative jobs from the USA.
    I dont have a problem with another state opening there doors to keep the work right here in the USA. And this theory, and bs theory that states and cities are realizing that the incentives dont pay off, is ludicrous.
    Hundreds of locals and industry people live, eat, buy and breathe locally. Either permanently or for 8 to 12 months. Sometimes 24 months. And with TV sometimes up to five years. Stop saying its isnt doing anyone any good. It is.
    The economy grows, and the business's thrive when you have productions in your city and or town or state.

  • Matte Object||

    Where do you draw the line?

    British Columbia subsidizes 60% of the salary for visual effects & animation workers, should California start subsidizing them at 75% to keep the work in the US?

    Nobody should be subsidizing the film industry, international subsidies in Canada & Europe should be subject to countervailing duties as they would be on tangible goods.

  • Rational Exuberance||

    I don't have a problem with Canada or Europe wasting their tax payers' money on subsidizing stuff for me, and I don't view that as "taking creative jobs from the USA". I just don't want my tax dollars wasted on those subsidies.

    And I do have a problem with arrogant actors and artists believing the represent "creative jobs", as if prancing around in front of a camera or regurgitating the nth version of Midsummer Night's Dream in Space represents any special form of creativity. Off to Bulgaria with you.

  • Hank Phillips||

    I just don't want my tax dollars wasted on those subsidies.

    Them's da gubmint's tax dollas. If dey was yours anymore, you'd be wasting them with no help from robbers.

  • Hank Phillips||

    Note to foreign readers: In Altruria as in National Socialist Germany, citizens hold title and deed to "their" jobs. Foreigners--especially SELFISH foreigners--must be expelled and their countries invaded.

  • Brad K||

    When in oregon I bought a new car, here in NC Ive bought a house, cars, and everything that goes with them. Thats the benefit. Im spending my money, paying my taxes to the locality Im in.
    But what is never brought up it seems, is the comparison of what the film industry gets as a incentive, compared to the incentives that other corporations get, such as the automotive industry, the pharmaceutical industry, etc etc.

    Incentives are not new. Incentives have been around for a long time. And even at that, the cost of doing business is less in other states. Its simple math. Even if the incentives did not exist, or were much lower. The cost of doing business elsewhere ( another state ) is what is attractive.

    its a bs argument that is skewed to whomever and whatever way it can to accommodate the individuals need to prove a point.

  • Brad K||

    And jared DOESNT even work in the film industry, doesnt know how it works and wouldnt have a clue. So, its just a clickable article to get you to this site and I fell for it.

  • Uncle Jay||

    RE: No Matter Who Wins at the Oscars, Taxpayers Lose on Film Subsidies
    Sarcasm Switch On:
    Not to worry. Steven Spielberg once said, "Money means nothing to me." I'm sure all the other Hollywood limousine liberals would agree with that.
    Sarcasm Switch Off

  • Rockabilly||

    And some talk of Dear Leader's concern about income inequality. I asked one celebrity that he should give me some of his income so we could have equal income but so far I have not received a check.

  • Hank Phillips||

    That's limousine looters. Liberals are unfortunates who, if only they'd been born whole or studied philosophy, would be libertarians.

  • Rockabilly||

    Is there a film tax credit program for porn?

  • retiredfire||

    Maybe someone can correct me but isn't a "tax credit" where some taxpayer, even a movie production company, simply pays less taxes than they would have, versus a "subsidy" where the government actually pays money out?
    Unless you think government truly needs every dollar it can extract and, thus, these credits result in increased taxes, elsewhere, tax credits sound like a good thing.
    If saying to any kind of business: "We're going to tax you less, so that your business hires a bunch of our citizens", is a bad thing, I can't figure out why. All you have to do is watch the credits roll by, after a movie is over, to see the number of jobs created.
    When you consider the ephemeral nature of movie making, government can't have any expectations of a regular income from their taxes, so it isn't something they budget for. It seems they are, simply taking less, in exchange for the benefit to their citizens. Not a bad thong.

  • AdamWEst||

    Yeah, I don't get the point of this article. States have different tax rates. Fin.

  • Matte Object||

    Tax Credits can be tax cuts, they can also be subsidies.

    If they refunded a portion of the taxes paid, they'd be tax cuts.

    However, most film tax credits refund a large portion of the total budget because movie studios don't pay taxes outside of California. Just giving them tax cuts doesn't interest them.

    For example, if a movie studio spends $100m in Ga. and Ga. refunds $30m of that to the movie studio - 30% of the BUDGET, not 30% of the taxes.

    Since spending is not revenue, Ga. only collects taxes on that $100m, so about $6-8m in taxes, however, they issue tax credits to the tune of $30m, these are transferable, so they're not capped at the tax liability of the movie production. Typically the movie will sell the tax credits to a third party like Walmart for 85-90c on the dollar, so Walmart pays $27m for a $30m tax cut, but ultimately the state is paying the movie studio to be there.

    Bear in mind, also, that there's no requirement that most of the money goes to locals, so when they say "we spent $100m in Georgia" what they really mean is "we brought all our expensive guys out to Georgia, paid them there, got 30% of our salaries covered and then went home".

    Georgia is basically spending $500m in taxpayer money a year in order to generate about $150m in new tax revenue - this is true for all states, provinces & countries with film subsidies.

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  • Duelles||

    My tourism dollars did go to Brownsville, OR for a week. Visiting family in Eugene, we rented a place big enough for my three kids and three grandkids. My kids grew up loving the movie,"stand by me" filmed in Brownsville back in the 1980s. The town did a nice, low key job of showing off the locations. Meanwhile, as a NM resident I would cut out any subsidy for film production. This place is so poor it makes no sense to give that money away. Feeding Santa Fe, gives away 900 bags of groceries each week to the needy all from volunteer donations. Hmm?

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  • Hank Phillips||

    So Leni Riefenstahl and Tricky Dick Nixon's political parties both understood the value of using tax money to bribe the media to indoctrinate the masses with additional looter propaganda? Who'd a thunk such a thing?

  • Hank Phillips||

    The Big Short happened when traders realized that the Bush Administration bribing corrupt State constabularies with asset forfeiture was getting a lot of grow houses and bank accounts confiscated. As homegrown agriculturists drained their earnings from banks and securities markets to avoid this, the Multiplier leveraged backward--as it did during the Herbert Hoover Administration--and the economy collapsed. Whatever is in that movie, I'll lay odds it depicts something different from what really happened. This is good, because if the Europeans were to figure out that the TARP was paid off by first exporting asset-forfeiture prohibitionism and then shorting THEIR collapsing securities values, that might sow distrust among "our" allies.

  • HenryC||

    One should point out that tax incentives are not subsidies. Tax incentives let the movie corporations keep more of their own money. They do not give government money to the corporations. The state gets the income tax of the employees of the company, and those employees are at least temporarily off the unemployment rolls. It is not a bad deal for the state.

  • Matte Object||

    When a movie production pays $5m in taxes and gets a "refund" of $30m, that's a subsidy.


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