Buried in the brief 21st, 22nd and 23rd paragraphs, the second part of a long Post-Gazette story about the “success” of Pennsylvania film tax credit program — and the supposed need for an expanded program — gets to the nub of the rub:
“Some would argue that even having a film tax credit program, let alone raising it by $200 million, is a waste of statewide funding. Michael Thom, an associate professor in the University of Southern California’s Sol Price School of Public Policy, has done extensive research on the effectiveness of film incentives in stimulating economic development and creating jobs.
“Thom said via email that, generally, such programs offer ‘no employment impact’ and serve as ‘a large drain from the state’s budget that will have to be made up with spending cuts, tax increases or both.’
“’The only thing they seem to bolster are studio profits and lobbyists’ careers,’” Thom said. ‘We live in the “follow the science” era. Pennsylvania policymakers should, too!”
That should tell you about all you need to know about the fallacy of film tax credits being a supposedly wonderful economic generator. But legislators — some with conflicts of interest because they work in the industry, others looking to bring home the proverbial bacon to their districts — routinely ignore the evidence.
Self-dealing and limp bacon is both unbecoming and unappetizing. And sound public policy demands that they read on.
As economist Robert Tannewald concluded in a 2010 study:
“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,” he concluded.
Among his specific findings:
State film subsidies are costly to states and generous to movie producers; subsidies reward companies for production that they might have done anyway; the best jobs go to non-residents; subsidies don’t pay for themselves; no state can win the film subsidy war and supporters of subsidies rely on flawed studies.
“State governments cannot afford to fritter away scarce public funds on film subsidies, or, for that matter, any other wasteful tax break,” Tannewald argues.
“Instead, policymakers should broaden the base of their taxes to create a fairer and more neutral tax system. Economic development funds should be targeted on programs that are much more likely to be effective in the long run, such as support of education and training, enhancement of public safety and maintenance and improvement of public infrastructure,” the economist stresses.
“Effective public support of economic development may not be glamorous, but at its best, it creates lasting benefits for residents from all walks of life,” Tannewald concludes.
Jake Haulk, president-emeritus of the Allegheny Institute, also notes there’s “an even more sinister aspect of the film credit racket”:
“It engenders competition among states and localities that end up in wasteful bidding wars, much like the stadium debacle of 25 years ago,” he says. “Besides, the full-length theater movie industry is becoming a massive economic loser for the studios.
And an unmentioned in all of this is the dirty little secret of Pennsylvania’s film tax credit program, as reported by Public Source back in 2017:
“Roughly 99 percent of all film tax credits over the past eight years [as of 2017] were sold to non-film companies.”
As Public Source reported at the time:
“The original purpose of the program was to attract out-of-state productions and grow the film industry in a way that made it a permanent part of the Pennsylvania economy.
“However, the state has been subsidizing Pennsylvania companies, primarily in the Philadelphia region.
It was in a prior Post-Gazette story (in February) that the headline asked “Is Pennsylvania’s film tax credit program competitive? Some say states should due more to lure Hollywood.”
But as the preponderance of scholarly research has shown for years, the question that should be asked is this:
“Does Pennsylvania’s film tax credit program work? Research shows it’s just another in a long line of corporate wealthfare schemes.”
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
