••• Tax & Spending •••

Film subsidies are a box office flop

Earlier this year, Kansas dodged a bullet when SB 91, a bill creating a film tax credit, sales tax exemptions, and grants for film projects, died in a House Committee. As highlighted by recent audits of the largest film incentive program in the country in Georgia, these credits are an Ocean’s Eleven-level heist of taxpayer dollars. The taxpayer largesse goes to  Hollywood studios instead of local artists with no accountability or return.

Georgia is a state where projects can get a 10% credit by adding a peach logo to the credits, amongst dozens of other incentives. But for the amount of money being thrown around, the return has been exceedingly poor. In 2016, Georgia gave out $667 million in tax credits and experienced a net revenue loss of $602 million: that’s almost double the $385 million that Georgia appropriated to its Department of Public Health for 2023. Consistently, film programs large and small fail to produce meaningful returns. Across the 40 states which offered film incentives by 2012, none of them have seen more than 30 cents returned for every dollar invested – Connecticut saw only 7 cents of return from every taxpayer dollar put in.

Georgia has some of the largest film subsidies in the country, totaling $5 billion between 2005 and 2020, with an estimated cost in FY 2023 of over $1 billion. Yet, over this same time, 88% of the film tax credits went to non-Georgia companies and 53% of the labor income went to workers from out of state. That’s far from the “supporting local” feeling that advocates for the film credits push.

The information supporting Georgia’s industry is largely produced from within the industry itself and is poorly substantiated. A report from Georgia State University’s Creative Media Industries Institute was “financially underwritten” by film industry advocacy groups. It’s no surprise that the report lacked any substantial data about the success of film credits. Sure: giving an incentive is going to immediately help the company that receives it…but the long-term effects determine whether that decision was worth it in the first place, and clearly, film credits haven’t been able to match those expectations.

A 2020 state audit found that the Georgia Department of Economic Development utilizes an unsubstantiated output multiplier more than double that of other investments to justify its film programs. The numbers are being tilted internally toward film incentives, but this lack of transparency isn’t new. In a study of 29 TV production subsidy programs totaling $2.5 billion across the country, 14 provided no recipient disclosure at all. Those that did provide disclosure usually only provided the names of recipients and some basic job data, but nothing about the nature of those jobs. On one hand, this is appropriate as taxpayer privacy should be of primary concern. And yet, when it comes to targeted subsidies and incentives – as opposed to something like a child tax credit that is broadly applicable – transparency is important.

It’s likely that next year, studios will come back again and make the case why they should get taxpayer dollars and the other specialized industries shouldn’t. But data from across the country continues to stand in opposition to this sort of frivolous spending.