Film and tax credits offer states an opportunity to generate jobs, economic activity and maybe most importantly, boast bragging rights in Tinseltown. But several states have become disillusioned with the economic impact of the tax incentive and have voted to end the subsidy.
Thirty-nine states and Puerto Rico have film tax credits of some form. But New Jersey is one of the latest states to eliminate its film tax credit, part of a growing shift against providing the film industry with what some consider costly giveaways.
Although the credit was relatively small, capped at only $10 million in credits per year, 327 film and television productions took place in the Garden State last year. It offered a 20% tax savings if at least 60% of a production was shot in New Jersey.
The argument to eliminate the tax credit is that it does not spur enough economic activity. Or as Cuba Gooding, Jr. said, “Show me the money!” However, it’s difficult to determine whether film tax credits are actually good or bad for a state. In Louisiana, where the film tax credit race started in 1992, two studies were produced that showed completely opposite effects.
The Louisiana Budget Project, an independent think tank, reported that over the past decade, Louisiana has forgone over $1 billion in tax revenue to film credits while generating only a modest increase in jobs, most of them low paying and temporary. On the other end, the Motion Picture Association of America claimed that in 2013 alone, the film industry generated 10,800 jobs, $471.2 million in personal income and $1.59 billion in economic activity for the state of Louisiana.
Whatever the “facts” are, at least 11 states have decided to either suspend or eliminate their film tax credits. Meanwhile, other states have chosen to capitalize on this situation by increasing their film tax credit budgets. Pennsylvania Lt. Governor Mike Stack and Governor Tom Wolf recently proposed to increase their $60 million per year cap, Maine is proposing to increase its allowable tax credit percentage, and California, the nexus of the film and television industry, tripled the size of its film tax credit to $330 million.
The siren call seems to be working. Four existing productions are moving from other states to California to take advantage of the increased funding. In just a one-week period last July, 254 applications for California film tax credits were approved. The four popular shows coming to California represents the growth and evolution of the entertainment industry.
Veep, a big name comedy starring Julia Louis-Dreyfus on the premium cable outlet HBO, is moving to California from Maryland, lured by a $6.5 million tax credit. American Horror Story, a premium cable show from FX featuring Kathy Bates, Angela Bassett and Lady Gaga, is coming back from Louisiana for $9 million in credits. Secrets and Lies from the ABC network is leaving North Carolina for $5.7 million in tax credits, and the VH1 production, Hindsight, is changing scenery from Atlanta to Los Angeles with $3.9 million worth of tax credits in hand.
California made a concerted effort to bring back ‘runaway production’ after garnering criticism for not doing enough to support one of its most crucial state industries. From 2004 to 2012, it’s estimated that California lost more than 16,000 film and television industry jobs, leading to a loss of $1.5 billion in lost wages and economic activity.
Clearly, California has a lot to gain by enticing the film and television industry to stay closer to home, and a lot of producers are jumping at the opportunity.