Study Shows Benefits of State Tax Incentives for Film Productions
By Daniel Lehman
According to the results of an MPAA-commissioned study that was released by accounting firm Ernst & Young today, state tax incentive programs that encourage film production are beneficial to both state and local economies.
Thirty-seven states currently offer tax credits to attract productions and create a sustainable film industry. These incentive programs tends to suffer when state budgets are cut, but the Ernst & Young study outlines the ways that film production boosts these economies in the long run and shows that the benefits of these tax incentives can greatly outweigh the costs.
“The primary benefits of film credits to state residents are increased employment and higher incomes generated by film production activities,” Robert Cline, Ernst & Young LLP’s National Director of State and Local Tax Policy Economics, said in a statement. “However, the economic benefits to residents extend beyond the production activities themselves and include increased activity by suppliers to the film industry and increased consumer spending from higher incomes.”
The short-term goal of state tax incentives is to attract new productions to the state. Hundreds of local jobs may be created as a result, including new opportunities for local actors. Studios have flocked to states like Louisiana, Illinois, Florida, and Georgia in recent years, which means more work for actors who live outside the entertainment hubs of New York and Hollywood.
But governments and local businesses can also see economic benefits from statewide activity related to these industries, such as increased tourism, development of film industry infrastructure such as studios and service providers, and other industries beyond the production itself.
According to the results, “In studies that examine the full range of economic benefits from film credits, the impacts from tourism and capital investments can be more significant than the impact of the film production activity. Significant increases in state tourism can be tied to film productions. In some cases, widely viewed films increased tourism to featured locations by more than 25 percent.”
The study offers a guideline for state governments to use in future analysis, rather than a detailed breakdown of actual revenue generated by film productions. But it does include impressive estimates of the potential for increased business and tax revenue in these regions. For example, the total economic impact of a $10 million production, according to an Ernst & Young case study, could generate up to $23 million in economic output, $5.7 million in income, and 159 resident jobs. At the same time, this level of activity would be expected to generate more than $750,000 in state and local taxes.
“The main focus of the evaluations of film credits to date has been whether or not the credits ‘pay for themselves ‘ through higher state and local tax collections,” Cline said. “But the more important issue for policy makers to focus on as they evaluate state film credits is the effectiveness of film credits compared to other state economic development programs in terms of jobs and economic development.”