The Palmetto Insider

The blog of the South Carolina Policy Council

The Plot Twist on Film Incentives: A Horror Movie for Taxpayers

with 2 comments

High wages. Creative. Hollywood stars. What’s not to like about the film industry?

Nothing, if film productions choose to come to South Carolina of their own accord. But when government gets into the business of incentivizing the film industry, there’s plenty not to like.

And it gets worse the deeper you dig.

From 2006 to 2007 $8 million in wages were paid to South Carolina residents for work in the film industry.

That sounds great … until you realize that the state paid these productions $8.4 million in rebates.

Bear in mind, too, that these are not simply incentives in the form of tax credits. This is cold, hard cash paid to the movie industry to film in our 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.” In addition, when government subsidizes a targeted industry, the relative tax burden to other individuals and businesses increases.

What about spending on goods and services? There, the state spent $7.3 million in rebates to generate $14.4 million in supplies and service sales for in-state vendors. Sounds like a productive activity – until you realize the state was subsidizing about half of the business expenses for these productions, a sweetheart deal that no one else in the private sector receives.

These videos from the Mackinac Center for Public Policy detail the perverse incentives that are common in Michigan – and reasons why South Carolina should avoid similar policies.

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Written by SC Policy Council

February 10, 2010 at 4:34 pm

2 Responses

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  1. The way of the world right now is about incentives and leveling the playing field – allowing states that have not been on the radar opportunities to earn dollars and build an infrastructure for an industry which will provide jobs, taxes, $$$ inserted into local economies. The State simply does not know how to find all the revenue that drops into these local economies like the hardware store…but its money that would not be there if not for incentives. Per Diems are untaxed and unincentivized money that is used to pay for food, entertainment, dry cleaning, gas, clothing and more. States need to find a way to
    determine how much money IS in fact brought in from elsewhere. The filmakers spend money upfront well before they ever see any return.

    M

    February 11, 2010 at 11:13 am

  2. […] simple 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 […]


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