Film tax credits have been tried just about everywhere, and they’re a bad idea.
Film tax credits have been tried just about everywhere, and they’re a bad idea.
H ollywood is about entertainment, and it’s always entertaining when Hollywood discovers that taxes are bad for business. But of course, rather than calling for tax reform across the board, Hollywood would rather have tax breaks just for itself.
Warner Bros. Discovery wants to expand in Nevada — if the state legislature passes film tax credits. “Warner Bros. Studios Chief Operating Officer Simon Robinson on Tuesday promised that the publicly traded media company would commit to a minimum of $500 million in annual content spending during the next 17 years — the length of time proposed by one of the legislative efforts to expand the state’s tax credit — totaling $8.5 billion,” reports the Nevada Independent.
The proposed tax credits would cost $190 million, the Independent reports, which would be “almost four times the amount of all other tax credits offered by the state each fiscal year.”
“We’re committed to both the bill and the state. We’re going to be around a long time,” Robinson said. If that’s true, that’s an argument for Nevada lawmakers to not approve the tax breaks. There’s no reason to bribe Warner Bros. with taxpayer money to encourage it to do something it is going to do regardless.
Included in the plans is a partnership with the University of Nevada Las Vegas for workforce development programs and internships. “It’s in our interest to partner with UNLV and build up a deep bench of talented, skilled professionals who can service our productions,” Robinson said. Again, if that’s true, that’s a reason to not approve the tax breaks. Businesses don’t need to be incentivized with public money to do things that are in their interest.
Film tax credits, like stadium subsidies, are popular ideas with politicians of all stripes that are deplored by economists of all stripes. They don’t help economic growth, and they usually end up costing states money for no reason. They are little more than vanity projects by politicians who want to see their state’s name show up in the credits of movies.
Almost every state has tried some form of tax credits for film. Forty states had film tax credits in 2010, but some eliminated or reduced them in 2011. Research from left-leaning and right-leaning groups around that time agreed that they were ineffective policies. The craze is coming back now, and 38 states now have some kind of film tax credit.
The research hasn’t changed. Georgia’s program, often touted as a success, gets the state only 19 cents for each dollar spent in credits, according to analysis from Georgia State University late last year. That is expected to decline to 15 cents in two years.
New York has spent $7 billion worth on film tax credits over the past 20 years. An independent analysis published earlier this year found that “the film production credit is at best a break-even proposition and more likely a net cost.” And that’s not from lack of funding. “The Film Production Tax Credit is by far the largest ongoing business tax incentive offered by New York — with the second largest cost of any credit in any state,” notes the Empire Center, a free-market think tank.
Nevada does not need to follow in Georgia’s or New York’s footsteps. Nevada already has a pretty good tax environment for business, ranking seventh in the Tax Foundation’s State Business Tax Climate Index, far ahead of Georgia (32nd) or New York (49th). That’s in large part because Nevada has no individual or corporate income tax. If Nevada lawmakers want to be even more business-friendly, they should seek to repeal the state’s especially harmful gross-receipts tax.
Hollywood doesn’t need any more tax credits. States in all parts of the country, under leadership from both parties, have tried and failed at this policy for many years. Next time movie stars call for higher taxes, remember that their industry begs for, and often receives, carve-outs.