Saturday, February 23, 2013

Movie Tax Subsidies

Glenn Reynolds has a piece in the February 23, 2013 Wall Street Journal about the various tax subsidies that governments provide to the movie industry -- and how unsuccessful they turn out to be at their supposed function:
About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University's Adam Thierer has called this "a growing cronyism fiasco" and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002.

In its 2012 study "State Film Studies: Not Much Bang For Too Many Bucks," the Center on Budget and Policy Priorities found that film-related jobs tend to go to out-of-staters who jet in, then leave. "The revenue generated by economic activity induced by film subsidies," the study notes, "falls far short of the subsidies' direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies' positive economic impact."...

The $1.5 billion in subsidies that states provide, according to the Center on Budget and Policy Priorities, "would have paid for the salaries of 23,500 middle school teachers, 26,600 firefighters, and 22,800 police patrol officers."
I would make one more point: like the same "incentives" that many state and local governments offer to large firms to move in and "create jobs," these are often tax advantages that a big firm will get, because they are big, but a small firm, especially one that is already doing business and employing people in a particular location, will generally not get.  A small firm does not have the political pull that a large firm does.  A $100 million dollar incentive to a firm might employ 10,000 people, but likely at the expense of raising taxes on a hundred small firms that might employ 100 people each.  Why should the big dog get the benefit, just because it is big?

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