Policy’s Rose-Colored Glasses
Film incentives: Are they as equitable as they seem?
Photo by Sam McGhee on Unsplash
“Looking through rose-colored glasses doesn’t presume we don’t see what’s real and true, but it does mean we’re choosing to see a lovely hue for a more optimistic view.” LeAura Alderson—cofounder of iCreateDaily.com—puts it bluntly how we can succumb to whetting our appetites with optimism. U.S. state governments and their policy creation are just as fallible to this weakness with the allure of Hollywood. New York and Los Angeles have been timeless hubs for film production and capitalizing on the savings that come with clustering in these regions. It wasn’t until the 1980s and technological advancements that film began to migrate and take flight to other regions of the U.S. as they gained mobility. States recognized and seized the opportunity of this industry shift with the formation of State Film Incentives (SFI’s) to propel economic development through job creation, generating tourism, and to add a “glamorous” cultural industry to their economic mix. Yet are governments opting for an attitude of overblown optimism in favor of ignoring the dust bunnies under the bed to deal with later? Is the hopeful short-term gain equitable for their long-term economic health?
Let’s first look at what SFI’s are and how they operate. Today, twenty-eight states offer sales tax exemptions, which waive fees such as income taxes, state and local sales tax as well as property taxes. Meanwhile, tax credits are used to refund portions of a project’s costs by offsetting tax liabilities. Yet, many of these incentives are through subsidies that parallel to a film’s input costs of marketing, advertising, nonresident and resident payroll, and transferrable credits. It may sound equitable for both state and producer until one looks at the financials and the effects on state residents. In 2015, Louisiana’s return on investment (ROI) from SFI’s was eighteen cents to the dollar while New Mexico faired with less with fourteen cents to the dollar. Then, there’s Massachusetts which lost $88,000 in tax revenue for every job created by film credits and filed by a nonresident. This loss was due to these credits “generating less than sixty-nine cents in income for residents” and the state lost sixteen cents for every dollar. How much are states giving to result in such low gains and massive losses? Nationally, the median states give to film producers is twenty-five cents to the dollar while outliers like Alaska and Michigan offer forty-four cents to the dollar in incentives. Twenty-five to almost fifty percent of each dollar is used to incentivize the film industry while states get back less than twenty percent of that. How do these financials translate economically for residents?
When a film production arrives to film in a state, the belief and hope is high for government and residents but dashed by jobs being bestowed to a specialized nonresident talent pool. Another unfortunate outcome is that most jobs that do end up going to residents are parttime and low paying such as “hair dressing, security, carpentry, sanitation, moving, storage, and catering.” These low paying jobs are transient and fleeting as film productions are typically time-bound projects with a distinct beginning and end. These incentives churn and culminate further with state spending getting cut in certain areas to accommodate SFI’s with taxpayer money. States may be aware of these pitfalls related to the subsidies they’ve established but choose optimism in favor of a “promising” future with a risky investment in a risky industry. Supporting flawed studies plays into this with veiled half truths about SFI’s equitability and actions taken by states because of the nature of tax credits being refundable, transferrable, and having a generous time-limit to cash in. This affects how a state’s financial statements appear to policymakers as an “overestimated cost effectiveness.”
It’s the Bachelorette where she chooses to whom she’ll gift a rose—where Hollywood will grace us with her presence as states vie to court her with SFI’s. Maybe it’s tunnel vision, but it appears governments will generously offer as much as they can to draw film producers to their state while areas such as education, local culture and arts, the state economy, and its residents pay the price. With this evidence, why are state governments still investing in SFI’s? If SFI’s are to continue, it might be lucrative for states to reduce the dollar amount on incentives or make acquiring them more competitive—painting a marketable image of themselves as high-value and desirable locations. Then and only then, we may see states bolster their long-term economic sustainability and growth.
Sources
Rosenstein, C. (2024). Understanding cultural policy: Government and the Arts and Culture in the United States. Routledge.
Meares, W., Hutton, A., Brown, S., and Morris, R. (2020). Show Me the Money: An Analysis of Georgia’s State Film Tax Credit Program. Questions in Politics, 7.
Tannewald, R. (2010). State Film Subsidies: Not Much Bang for too Many Bucks. Center on Budget and Policy Priorities. Washington, D. C.
