The Palmetto Insider

The blog of the South Carolina Policy Council

Film Industry Incentives: An Economic Policy Flop

with one comment

The Tax Foundation recently released a study detailing why film industry tax credits and incentives are bad state policy.

The report lists 7 different types of film incentives. South Carolina is one of 7 states to offer 5 of the 7 incentives. These are:

  • Movie Production Incentives
  • Cash Rebates
  • Sales Tax Exemptions
  • Lodging Exemptions
  • Fee-free locations

As the Tax Foundation study demonstrates, film incentives can easily get out of control. In Iowa, for instance, documents released by the governor showed the following “tax credits” given to movie companies:

  • A Mercedes and Range Rover for producers to keep
  • Contracts amended after completion to increase credits
  • Large state-funded payments to relatives of filmmakers

Although this is an extreme example, it represents what can happen if politicians convince themselves that film credits are an unlimited bounty to the state.

As the Policy Council details in Unleashing Capitalism, film credits actually “generate a net loss in revenue equal to 81 percent of expenditures on rebates.” Additionally, “When government spends taxpayer dollars to subsidize a targeted industry the relative tax burden to individuals and businesses will increase.”

Despite research showing why film credits are detrimental to state economies, the growing trend has been toward more incentives. In 2002, 5 states offered movie production incentives – today, 44 states are doing so.

Needless to say, film incentives offered by states have created a boon to the film industry, as rent-seeking increases by parlaying one state against another. According to the Tax Foundation report, states have been offering “bigger and better” packages.

In reality, a film credit indirectly takes money from other taxpayers and redistributes it to the film industry – which is often doing little more than creating temporary jobs.

To see a list of films that have received S.C. incentives, click here.


Written by SC Policy Council

January 15, 2010 at 12:55 pm

One Response

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  1. […] as all that, we would point out that film incentives simply don’t work. As we’ve written here, here, here and here. As demonstrated in Unleashing Capitalism, handing out rebates to the film industry […]

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