Taxpayers are constantly told that film incentives are supposed to be a “temporary” subsidy to “plant and grow” an industry. But as Milton Friedman once observed, “Nothing is so permanent as a temporary government program.”
In North Carolina, the legislature has cut the state incentive program, once among the most generous in the nation, down to zero starting in 2014. While debating the budget, the Motion Picture Association of America, sent a letter to the state that read: “[W]ithout an extension of the production incentive program, North Carolina will no longer be considered for major feature films.”
The MPAA represents nearly every major film and television producer in the country: Paramount Pictures, 21st Century Fox, Sony Pictures Entertainment, NBC Universal, Walt Disney Studios and Warner Brothers. The letter takes some chutzpah. Billion-dollar companies demanding select corporate welfare from state taxpayers.
As Mackinac Center for Public Policy analysts have written previously, the economic analysis of these programs is nearly universally against them being worth the taxpayer money. In Michigan, they have never been found to return what they cost. The same has been found in other states.
A study in Louisiana from the left-leaning policy group Louisiana Budget Project found that the state paid out $7.29 in incentives for every dollar brought in. The state has spent more than $1 billion since 2005 without any uptick in film jobs. In California, the state’s Legislative Analyst Office found that, contrary to reports, state and local government tax revenue was likely well under what was spent on the program. And that’s in the state everyone associates with the movie industry.
The king of film production is Hollywood, but it didn’t happen because of rich subsidies; significant film credits only began in California in 2009. Now the city is worried. The mayor of Los Angeles declared a “state of emergency” in a front page story in Variety. Unsurprisingly, he wants the state legislature to up the subsidies.
This is a strong case against film subsidies. Michigan has been continually assured that once a film industry is built here, the subsidies can be phased down.
But California is the clearest case yet that Hollywood studios are simply playing states against each other. That’s fine for them — they are in the business of getting as much (legal) money as they can. But politicians shouldn’t force taxpayers to be on the hook for these bad expenditures.
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