Like a Hollywood fantasy, claims that tax subsidies for film and TV productions — which nearly
every state has adopted in recent years — are cost-effective tools of job and income creation are
more fiction than fact. In the harsh light of reality, film subsidies offer little bang for the buck.
State film subsidies are costly to states and generous to movie producers. Today, 43
states offer them, compared to only a handful in 2002. Over the course of state fiscal year 2010
(FY2010), states committed about $1.5 billion to subsidizing film and TV production (see
Appendix Table 1) — money that they otherwise could have spent on public services like
education, health care, public safety, and infrastructure.
The median state gives producers a subsidy worth 25 cents for every dollar of subsidized
production expense. The most lucrative tax subsidies are Alaska's and Michigan's, 44 cents and
42 cents on the dollar, respectively. Moreover, special rules allow film companies to claim a
very large credit even if they lose money— as many do.
Subsidies reward companies for production that they might have done anyway. Some
makers of movie and TV shows have close, long-standing relationships with particular states.
Had those states not introduced or expanded film subsidies, most such producers would have
continued to work in the state anyway. But there is no practical way for a state to limit
subsidies only to productions that otherwise would not have happened.
The best jobs go to non-residents. The work force at most sites outside of Los Angeles and
New York City lacks the specialized skills producers need to shoot a film. Consequently,
producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to
be spotty, part-time, and relatively low-paying work — hair dressing, security, carpentry,
sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong
economic development in the long term.
Subsidies don't pay for themselves. The revenue generated by economic activity induced by
film subsidies falls far short of the subsidies' direct costs to the state. To balance its budget, the
state must therefore cut spending or raise revenues elsewhere, dampening the subsidies' positive
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No state can "win" the film subsidy war. Film subsidies are sometimes described as an
"investment" that will pay off by creating a long-lasting industry. This strategy is dubious at
best. Even Louisiana and New Mexico — the two states most often cited as exemplars of
successful industry-building strategies — are finding it hard to hold on to the production that
they have lured. The film industry is inherently risky and therefore dependent on subsidies.
Consequently, the competition from other states is fierce, which suggests that states might
better spend their money in other ways.
Supporters of subsidies rely on flawed studies. The film industry and some state film
offices have undertaken or commissioned biased studies concluding that film subsidies are
highly cost-effective drivers of economic activity. The most careful, objective studies find just
Given these problems, states would be better served by eliminating, or at least shrinking, film
subsidies and using the freed-up revenue to maintain vital public services and pursue more costeffective
development strategies, such as investment in education, job training, and infrastructure.
Effective public support of economic development may not be glamorous. However, at its best, it
creates lasting benefits for residents from all walks of life.
State governments cannot afford to fritter away scarce public funds on film subsidies, or, for that
matter, any other wasteful tax break. On the contrary, policymakers should broaden the base of
their taxes to create a fairer and more neutral tax system.