film incentives

House, Senate, and governor disagree on the best way to do a foolish thing

It would be preferable if at least one of the three would call for the sensible thing. Unfortunately, the public debate starts with doing the foolish thing.

The foolish thing in question is special treatment for a single industry: film. I had hoped that the House would have realized that across-the-board corporate tax cuts were working as an all-comers incentive. I hoped they’d see what the governor and Senate didn’t: that North Carolina’s stellar economic performance lately owes to its people enjoying greater economic freedom as its politicians chose more and more to quit meddling rather than play favorites.

I suppose it’s like hoping your horse will win at Belmont despite having lost the Kentucky Derby and Preakness, plus being named Always Comes In Second.

Here is how the House, Senate, and governor compare on film giveaways:

  • House: Expects $18.6 million left over in the Film and Entertainment Grant Fund at the end of this fiscal year. Would give the fund $15 million in nonrecurring funds in 2017-18 and $30 million in nonrecurring funds in 2018-19. That is $33.6 million in 2017-18 and at least $30 million in 2018-19 “to encourage the production of motion pictures, television shows, and commercials and to develop the filmmaking industry within the State.”
  • Senate: Expected (at the time) $15 million left over in the Film and Entertainment Grant Fund at the end of this fiscal year. Would give the fund $15 million in recurring funds in 2017-18 and $15 million in recurring funds in 2018-19. That is $30 million in 2017-18 and at least $15 million in 2018-19 “to encourage the production of motion pictures, television shows, and commercials and to develop the filmmaking industry within the State.”
  • Gov. Cooper: Give the Film and Entertainment Grant Fund $15 million in 2017-18. Convert the program to Film Tax Incentives that would be refundable up to 25 percent of a film production’s “qualified expenditures.” The incentives would begin at $20 million in 2018-19 and then be $40 million per fiscal year afterward. That is (with the expected leftover) $30 million in 2017-18, at least $20 million in 2018-19, and then at least $40 million a year afterward “to encourage the production of motion pictures, television shows, and commercials in North Carolina.”

Helping the film industry but no one else

The refrain of to develop the filmmaking industry is — well, that’s pretty much it as far as the giveaway goes. In his 2016 study in the academic journal The American Review of Public Administration, Prof. Michael Thom of the University of Southern California found that state film incentive programs have no impact on their states’ economies or industries. They basically just benefit film companies and current workers.

There are plenty of reasons state leaders should zero out film giveaways entirely.

State reviews of their own film incentive programs consistently find they are net money losers. NC’s previous program (which the governor would essentially recreate) was returning only 19 cents per dollar.

film studies

It’s a relatively steep price to pay for one industry.

Grading the giveaways

Returning to the initial dilemma, who does the foolish thing the best: the House, the Senate, or the governor?

It’s certainly not Cooper. His plan would spend much more after converting it back to a constitutionally questionable “refundable” credit. Out-of-state film productions love “refundable” tax credits — they have little tax liability in this state so refundable credits amounts to open-ended cash giveaways.

Cooper’s plan gets an F. Perhaps a more generous grader would give it a D, since he didn’t increase the spending as much as might be expected.

The House plan would spend more than the Senate but would keep it nonrecurring so it would require legislators to revisit the issue in future budget decisions. The Senate would make the giveaway a recurring one, meaning it’d be baked into budget expectations going forward.

Those get a C minus and note scrawled next to it saying You can do better!

Not increasing spending as much as Cooper would and not converting the grant program to tax incentives — those are all that makes the House and Senate budgets’ plans for film giveaways marginally better foolish things than Cooper’s idea.

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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