Keep your head in the sand and reach for the stars
By Jon Sanders
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North Carolina's film tax incentive program is in the news
again. The Fayetteville Observer recently carried a puff piece about how "Stars have
aligned for North Carolina's film industry." That would be movie
stars, of course, whose famous names make up the story's opening lines: "Robert
Downey Jr., Gwyneth Paltrow, Hilary Swank, Jennifer Aniston, Julianne Hough and
Josh Duhamel all are filming movies in Wilmington or nearby Southport, causing
a stir every time they go out in public."
The article provides no mention of the criticism of film tax incentives, which
comes from the N.C. Institute for
Constitutional Law, the Civitas
Institute, the Tax
Foundation, and yours truly in the second report in
Nevertheless, the Observer offers some good points. Readers learn that North
Carolina had a bustling film industry until other states and nations began
offering incentives, that North Carolina has a diverse array of natural
resources that provide productions all kinds of settings ("We can play
middle America, beaches, upstate New York, small towns, vast landscapes, farms
-- just about everything other than specific large cities"), that the cost
of living is low here, and that there are stages and experienced crew workers
Discerning readers can wonder whether the incentives are necessary. Granted, it's
not fun when the stars go elsewhere. Even California has gotten into film
incentives. Nevertheless, California
-- like Georgia,
and notably even like the unofficial capital of film incentives, Louisiana
(to name just a few) -- is also questioning whether the incentives are a good
As my report shows, states are reaping mere pennies on the dollar of revenue
spent on film incentives. As things stand, they are also locked in a race to
the bottom with themselves as well as with other nations. We've already seen
state policy change once because the
hero didn't get the girl -- i.e., after North Carolina whiffed on a Miley Cyrus
flick, embarrassed state leaders upped the incentives from 15 percent of
qualified expenses to 25 percent.
As my colleague Fergus
Hodgson points out in Agenda 2012, North Carolina's business tax climate
ranks 44th in the nation and is the worst by far in the South. North Carolina's
rankings in personal income tax (43rd), retail sales tax (47th), and corporate
income tax (29th) are nothing to boast about. North Carolina has one of the
worst unemployment rates in the nation. If lower taxes and regulations are what
it takes to get film productions coming to North Carolina, why limit that
incentive to just film production? If state leaders opted for a broad-based
incentive -- that is, if they cut taxes and regulations across the board, bringing in
all kinds of production -- they could be telling entrepreneurs across the
county, "You don't have to be a star, baby, to be in our show."
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