By Jonathan Miller, Project Associate.
In August of 2011, I wrote a blog post about film incentives
and the ability of the sector to grow jobs. I concluded that the jobs numbers
were a poor rationale for continued subsidies, especially in Georgia. I also
said that if I ran into “Catherine Heigel, Keira Knightley, or Angelina Jolie,”
then I would personally sponsor the next piece of incentive legislation. I
would like to revisit the former statement with new data and analysis, but I
still wholeheartedly stand by the latter.
The discussion revolving around film incentives has waxed
and waned in recent years, but there still remains no definitive answer as to
the “worth it factor” of these incentives. The competition for feature films is
increasing and international destinations such as Australia (“The Great
Gatsby”), Canada (“Godzilla”), and the United Kingdom (new installments of
“Star Wars”) are rapidly asserting their ability to compete, especially on
incentive packages. As Variety
reported, the exodus of motion pictures to other shooting locales has prompted
the Mayor of Los Angeles, Eric Garcetti, to state the loss of such films is
an “emergency” and at the top of his political to-do list.
One of the areas of the country that has upped its appeal
for filming is the Southeast. As the map below shows, Louisiana, Mississippi,
Alabama, Georgia, and South Carolina are among the states offering the highest
tax credits. The map, which ran in the Wall
Street Journal, accompanied a piece on North
Carolina’s film incentives, which are slated to sunset in 2015. Rep. Mike
Hager, the GOP majority whip, is perturbed by the opportunity cost of $70
million and was quoted as saying, “We could have paid more teachers, kept our
teacher assistants, given raises to our highway patrol.” It is unclear whether
sunset provisions for film incentives are becoming a trend, but states such as
Texas, California, and Nevada have increased their overall funding for
incentive programs.
Film Tax Credits available by state, 2013
Note: Restrictions on tax incentives vary by state. States differ in the mechanism for paying incentives. Tax incentives may be capped, and also may be limited to specific areas of a film’s budget.
Note: Restrictions on tax incentives vary by state. States differ in the mechanism for paying incentives. Tax incentives may be capped, and also may be limited to specific areas of a film’s budget.
Source: Wall Street
Journal, “North Carolina's Film Tax Credits Head for Cutting-Room Floor” via
EASE Entetainment Services and Michigan Film Office
In my previous post, I looked at jobs in the motion picture
and video sector (NAICS 512) and the onset of incentives programs to see if
there were any correlations. The continued loss of jobs in Georgia, even after
the beginning of the film incentive program in 2005, was the main takeaway.
However, Market Street has recently acquired EMSI, allowing for more in-depth
study of different sectors. The following table shows the current status of
jobs, earnings, and multipliers for a range of Southern states and California
in motion picture and video production (NAICS 512110) and teleproduction and
other postproduction services (NAICS 512191).
Impact
of the film sector by state, 2013
Note: LQ is the “location quotient” and
measures the concentration of jobs in the state relative to the nation. A score
of 1.0 indicates that the employment has the same concentration as the average
community. Location quotients above 1.0 indicate more concentration (and
conceivable a competitive advantage).
Source: EMSI
The sampling of states presented in the previous chart reveal
some interesting insights. First, much of the rationale behind film incentives
relies on the multiplier effect as film activity supports local economic
activity. The states with the highest job multipliers are California (5.22),
Florida (3.35), and Georgia (2.97), indicating these states are seeing film
activity translating into more jobs than in other states. In terms of earnings,
California (2.96), Florida (2.55), and Texas (2.42) are the states with the
largest multiplier effects. Second, states with the highest film incentives
tend to have lower jobs and earnings multipliers. Alabama, Missouri, and
Oklahoma offer the highest tax credits (35 percent), but are not seeing as much
follow-on activity. Plus, the average wages in these states are less than half
the national average for the sector. Third, jobs and earnings are only one way
of measuring “impact.” State and local tax receipts are another measure of how
well incentives pay off, but the data and methodology tend to be inconsistent.
However, according to the Tax
Foundation, “every independent study has found film tax credits generate
less than 30 cents for every $1 of spending.”
Overall, the film incentive debate is still murky. Higher
tax credits are not correlated with more jobs or higher multipliers. But on the
other hand, some states are seeing growth and economic activity derived from
the sector. What we don’t know, and it’s a central question, is whether or not
film incentives are the best option, politically and fiscally. Until we can
answer that, film incentives are likely to stay around as long as the Fast & Furious franchise… number 7
is being filmed in Atlanta now!
