Study says film tax credits have no economic benefits

Tax incentives given to the film industry don’t actually benefit states’ economies, according to a study released by a USC professor over the summer.

Michael Thom, an assistant professor in the USC Price School of Public Policy, served as the lead author of the study. His findings showed that tax incentives have resulted in little to no economic growth for states, yet these states continue to invest in the film industry.

Initially, states used tax breaks for film companies as a way to address the issue of the growing unemployment and to boost individual state’s economies. Despite the efforts, which include offering waivers on sales taxes, tax credits and rebates to film producers, states are losing millions of dollars every year.

“We looked at job growth, wage growth, states’ share of the motion picture industry and the industry’s output in each state.” Thom said in a statement. “On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost nonexistent. Market share and industry output didn’t budge.”

The failure of tax incentives to solve these problems has raised questions of how this will affect film students and filmmakers in the state of California. Thom believes that the film students in California have not been affected by film credits.

“USC’s film school built its reputation without tax subsidies,” Thom said. “Students are attracted to our film school because of the school’s prestige and proximity to the industry. California’s tax subsidies specifically exclude student films, as well as other student-friendly projects.”

Thom’s suggestions for California-based film students were less about the industry, and more about the cost of living in an expensive state.

“Students that want to stay in California should worry more about taxes, the cost of housing, regulatory burdens, and labor costs,” Thom said. “All of [these] are much higher here than almost every other state.”

The study indicated that a total of 36 states have continued to give the film industry tax incentives, with New York coming in as the biggest investor. New York University, which has one of the highest-ranked film schools in the nation, also continues to see high application numbers.

The biggest investors other than New York and California include  Louisiana, Connecticut and Georgia, and despite the lack of economic impact tax breaks provide, film students and filmmakers continue to flock to these states. The prestige and proximity to the movie industry, according to Thom, act as more important factors in the decision-making process than the potentially undesirable economic consequences.

“After a state has invested tens of millions of dollars, no politician wants to acknowledge that the program is a waste of taxpayer money,” Thom said.