Stephen Slivinski

Don't create a sequel to the film tax credit

Posted on March 13, 2012 | Author: Stephen Slivinski
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It’s often said sequels are never as good as the original film. The same can be said of the recently-proposed multi-media tax credit (SB 1159) that is meant to replace the expired filmmaker tax credit. This sequel is a bad idea. And, in this case, the original was pretty terrible, too.

The tax credit is defended as a way to lure filmmakers to shoot their production in Arizona. Yet there’s no need to skip to the end of the screenplay to see how it ends: it’s a classic tale of corporate welfare.

According to the state Department of Commerce, pre-approved film projects in Arizona took advantage of at least $7.89 million in tax credits in 2009. This equals one-third of the overall in-state spending on these projects.

By Commerce Department estimates, the film and television productions receiving the credits hired 249 Arizona residents and an additional estimated 59 non-production jobs were counted as resulting from in-state spending by a production company. That’s a subsidy of around $25,000 per job, if you make the generous assumption that each of these jobs wouldn’t have existed at all without the tax credit.

Looking at it another way, the Commerce Department reports indicate these tax credits went only to seven specific production companies. That’s an average subsidy of just over $1 million per company.

To make the sequel even more dramatic, the new tax credit bill is being treated as “emergency” legislation. That’s a designation usually reserved for bills needed to deal with unforeseen public safety threats. This turns an already bad bill into an even worse comedy. Only in the halls of the legislature does anyone view the potential failure to subsidize a multi-billion dollar industry and losing the opportunity for policymakers to hob-knob with producers and movie stars as a looming catastrophe.

Stephen Slivinski is senior economist at the Goldwater Institute.

Learn More:

Goldwater Institute: Tax Breaks for Movie Producers

Arizona Legislature: Senate Bill 1159

Arizona Department of Commerce: Annual Report – Motion Picture Production Tax Incentives Program

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