New Report: More States Abandoning Film Tax Incentives


Editor’s note: This past legislative session ending May 5, 2011, Hawaii lawmakers considered whether to increase the film tax credit for two Hollywood film companies. The bill died for 2011, but will be alive in 2012. Relativity Media and Shangri La headed up the effort and offered lawmakers the construction of two film studios on Oahu and Maui respectively in exchange for a higher tax credit. HB 1551 and SB 1550 would have increased the film production tax credit on Oahu by 35 percent (from 15 percent) and 40 percent (from 20 percent) on the neighbor islands. But the legislation died in the final days of the session. The Tax Foundation of Hawaii said the legislation would cost the state an estimated $46.3 million in lost revenues. But the production companies used their their political ties in an effort to sway lawmakers. Bill Clinton, who has financial ties to both companies and other motion picture industry executives, sent a letter to lawmakers in support, and several well known actors testified at the capitol and sent in testimony.

BY TAX FOUNDATION STAFF – We released a new report late yesterday on the recent decline in the number of states offering film tax incentives and the amounts offered:
In 2010, a record 40 states offered $1.4 billion in film and television tax incentives. All told, states have provided nearly $6 billion for such programs over the past decade. 2010 will likely stand as the peak year, since many governors and legislators are ending their programs, preferring to use the money for other priorities or leave it with taxpayers.[…]

[W]hile film incentive programs were once universally applauded as great economic development tools and tourism boosters, their merits are now being rigorously debated. At a minimum, film incentive programs should be required to report how many dollars in incentives were provided per each Full-Time Equivalent (FTE) job created by qualified productions. Programs should be reviewed periodically for their effectiveness by legislative oversight or a third party.

The report details recent suspensions or eliminations in Arizona, Arkansas, Idaho, Iowa, Kansas, Maine, New Jersey, and Washington. Additionally, programs are facing additional restrictions or scrutiny in Alaska, Connecticut, Georgia, Hawaii, Michigan, Missouri, New Mexico, Rhode Island, and Wisconsin.

On the other hand, officials have extended, protected, or expanded film incentive programs in California, Minnesota, Nevada, Ohio, Pennsylvania, Utah, Virginia, and Wyoming.

Governors Rick Snyder (R-MI), Susanna Martinez (R-NM), and Lincoln Chafee (I-RI) have been particuarly critical. Advocates of their film incentive programs have included Governors Mark Dayton (DFL-MN), John Kasich (R-OH), Tom Corbett (R-PA), and Bob McDonnell (R-VA).

Check out the new report here. Also see our larger report on film tax credits, “Movie Production Incentives & Film Tax Credits: Blockbuster Support for Lackluster Policy.”