The film industry dance: another amazing success story that’s one lost public dollar from collapse

Not to be outdone by solar, the film industry in North Carolina is performing a redoubtable Incentives Dance – and they’ve added a new twist on it by suggesting that the mere appearance of a bill to tweak the industry’s tax credits is already hurting business.

Several recent news articles across the state have highlighted the issue, including WWAY, the Wilmington Star-News, and the Winston-Salem Journal. This table compiles quotes from each of them:

NC offers great resources in geography, talent, etc. to film here Tax breaks aren’t enough; NC has to pay people to get them to film here
“[Commerce Secretary Sharon] Decker encouraged [N.C. Film C]ouncil members to tell an accurate and compelling story about how the film industry has grown jobs and opportunity.” “… the hubbub over the bill may have already hurt business. ‘It’s hard to put the genie back in the bottle once somebody puts out a bad idea,’ said John Merritt, a lobbyist who represents the film industry.”
“Newirth says North Carolina offers tremendous variety, a talented crew base and great infrastructure. He says shooting in Wilmington was one of the best experiences he’s had filming a project on and off the set.” “Leaders say the state’s film incentives are a huge draw for productions like ‘Iron Man 3’ when choosing a location. … Filmmakers agree on the attractiveness of the incentives.”
“In 2011, a year that saw Iron Man 3 and The Hunger Games film in the state, the North Carolina Film Office reported $220 million in spending that created 3,300 jobs. That number climbed to more than $376 million the next year.” “Under the new legislation, companies could use tax credits to reduce what they owe but not to collect additional money. Opponents say that change would gut the incentive because most crews have little to no tax liability and North Carolina can expect to see its film boom go bust.”
“In 2011, the state paid $30 million in tax credits to 22 film companies that spent $120 million and employed 10,500 people, according to the N.C. Department of Revenue.” “A recent analysis from the General Assembly’s nonpartisan research division concluded that only 55 to 70 jobs in 2011 can be directly attributed to the state’s tax credits. It also argued that the money spent in 2011 would have yielded 290 to 350 more jobs if the state cut business taxes across the board by the same amount.”
 “Although the movie was filmed mostly in Tar Heel State it may not look like it. One of the film’s masterminds shared some of its movie magic. ‘We doubled North Carolina for all sorts of locations,’ Executive Producer Charles Newirth said. ‘We made Afghanistan and Florida, Tennessee, California.'” “Johnny Griffin, director of the Wilmington Regional Film Commission … pointed out [that film production] companies are rational players hunting for the best deals in a market with plenty of choices. ‘I think in our case it’s very clear that our clients basically run financial models on each state, and the films taking place in ‘Anytown U.S.A.’ can be done in multiple locations,’ he said. ‘It basically comes down to a business decision.'”

 

Time will tell if Republicans will join in or tell all the incentives-takers that the jig is up. But it’s not that their choice is between (a) lower taxes for a favored few industries and (b) high taxes for all. As my study on the film incentives put it, and as reiterated in the Fiscal Research finding quoted above (in the second to last row in the table),

The film incentives amount to a tacit admission by state officials that lower taxes and regulations would attract more industry. So why play favorites with industries? Why not just lower taxes and regulations altogether?

Cutting taxes would provide “powerful stimulus to the North Carolina economy,” BHI found. By leaving more financial resources in the hands of individuals and businesses, it would increase employment, creating thousands of new jobs. It would attract more investment from local as well as out-of-state businesses, leading to well over a billion dollars in new investment in two years. Though state revenue would initially drop, it would recover through greater growth of the state’s economy. This faster rate of growth would owe to new and permanent jobs created by the catchall incentive of lower taxes across the board, which would be unlike the film tax incentives’ temporary jobs and their shifts in production from other industries.

Jon Sanders / Director of Regulatory Studies

Jon Sanders studies regulatory policy, a veritable kudzu of invasive government and unintended consequences. As director of regulatory studies at the John Locke Foundation, Jo...

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