Film Tax Credits Don't Give States An Economic Boost

From Massachusetts to North Carolina, Michigan and Iowa, a similar picture is emerging: Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers.

But against all evidence, the allure of bringing Hollywood to their hometown is strong for policymakers. Last week, Governor Martin O'Malley signed legislation to triple Maryland's film tax credit program from $7.5 million to $25 million for production companies that spend at least $500,000 in the state.

The need to offer tax credits should really prompt policymakers to ask another question. Why do film companies need to be tempted into the state to begin with?

The idea of giving film companies tax credits took off in the 1990s, when the high cost of doing business in California led production crews into Canada. Louisiana policymakers saw an opportunity: In return for tax breaks or credits, film companies could instead bring jobs and business to their state.

Since then, 44 states, the District of Columbia and Puerto Rico have put into place movie production incentives, which try to lure film companies with tax credits, exemptions, grants or rebates. Twenty-eight states offer films tax credits that require companies to spend a certain amount in-state and employ a minimum number of people. In return, companies apply a credit to their income tax based on the percent of expenditures, wages or investments generated in-state due to the production.

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