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Public cash for the film industry: the crutch that supposedly turns Tiny Tim into Superman

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The legislature has adjourned, but it’s not too soon for film production companies to start making noise about the possible expiration of the tax credits for film productions in 2015.

To hear advocates talk, you’d think the entire industry was on the brink of death. Then again, that’s what they do. They told us the same over a bill merely being introduced that would have — no, not ended the film tax credit; not even close — made the film tax credit nonrefundable and instead allowed unused portions of the credit to carry over for up to five years.

"Just the fact that this bill has been introduced, regardless of changes, is enough of a sign to production companies to possibly not come here," said Johnny Griffin, Director of the Wilmington Regional Film Commission.

"All this bill does is eliminate jobs," Rep. Susi Hamilton (D-New Hanover) said. "No incentives, no film industry. This bill kills jobs in North Carolina."

The bill didn’t pass, but we’re told the peril always remains. North Carolina’s film industry has been dramatically near death more times than even Frodo Baggins and his infamous "stabbed face."

Regardless, incentives advocates continue in their bizarre rhetorical balancing act to promote the tax credit’s continuation as-is — i.e., an open-ended, likely unconstitutional system of drawing money from the state Treasury without appropriation to make direct payments to out-of-state film production companies. They depict the industry as incredibly strong and incredibly weak.

OK. It’s an industry that thrives on the suspension of disbelief. If viewers can believe in sharknados and Category Seven hurricanes spinning out of industrial smokestacks, then perhaps policymakers can believe in amazingly successful industries that would evaporate by the mere loss of state tax credits.

In this tale, the crutch that props up Tiny Tim somehow turns him into Superman. Without that crutch? Well, they see an empty seat, Ebenezer. "If these shadows don’t change in the future" — i.e., if the tax credit isn’t made permanent and if legislators don’t stop questioning it aloud — "the child will die."

Stories appeared last week in The News & Observer and WRAL discussing film industry concerns over the fate of the tax credits. Quotations in the articles veered madly between the Strong Industry and Weak Industry polarities like washed-up actors dodging hungry, twister-flung great whites from the sky.

The following table compiles passages from both articles linked above (one can find a similar table here, back when that modest, ill-fated bill was under debate):

North Carolina’s film industry is incredibly strong

North Carolina’s film industry is incredibly weak

"It does create jobs. It does induce spending in North Carolina. That’s real economic impact," said Aaron Syrett, director of the North Carolina Film Commission.

"If the incentive goes away, it decimates this industry," said Aaron Syrett, director of the state film office.

Advocates say the incentives have led to hundreds of millions of dollars in economic activity, brought recognition to the state and sustained an industry with as many as 4,000 employees here.

"If the film incentives were to sunset tomorrow, the trucks would be loaded tomorrow and go back to California or somewhere else. The finances drive the industry right now," said Dale Williams, a unit production manager for the CBS drama "Under the Dome."

In a letter to Commerce Secretary Sharon Decker last month, Vans Stevenson, senior vice president for the Motion Picture Association of America, estimated that Fox’s "Homeland" series and the pilot for "Sleepy Hollow" have already created 1,500 jobs. 

Stevenson said North Carolina was "at a crucial economic development tipping point" and warned that the state was already losing productions to other states. 

"Television and film companies make an enormous investment in the state," Williams said.

"I can tell you if there is no movement between now and next June, I will be scouting the rest of the country for a new location," she said.

"We’ve got to have some kind of major industry," Coffey said when asked about whether the state should continue the film credits.

"I wish it were otherwise," said the film commission’s Syrett. "But without the incentive, the industry will leave North Carolina."

Incidentally, WRAL chose to open its article with Lake Lure’s "Dirty Dancing" Festival. It’s been 26 years since "Dirty Dancing" was released, and according to WRAL, "The festival is an example of the lingering impact a movie or television production can have on a community even decades after production wraps and the critical buzz dies away."

The article neglected to point out that "Dirty Dancing" was made in North Carolina years before the state offered film tax credits. Presumably the report lacked a festival to commemorate a newer, state-subsidized film, like 2011’s "A Good Old Fashioned Orgy" (which received nearly five times more in state incentives than it grossed at the box office) or 2012’s "Piranha 3DD" (which racked up $1.8 million in state tax credits, scored the likes of David Hasselhoff, Gary Busey, and Christopher Lloyd, and earned this extremely lengthy, disturbingly detailed parents guide listing on IMDb).

Be that as it may, as my report explained,

In the years before state film incentives, North Carolina was a popular off-Hollywood destination for film crews. A right-to-work state with a pleasant climate and a range of features — beaches to mountains, rural vistas to urban cityscapes — North Carolina held significant advantages for movie makers, including comparatively low wages and rental rates. For example, in the dozen years from 1983 to 1994, North Carolina was the site of such major features as "Brainstorm," "Firestarter," "A Breed Apart," "The Color Purple," "Maximum Overdrive," "Dirty Dancing," "Weekend at Bernie’s," "Bull Durham," "The Handmaid’s Tale," "Teenage Mutant Ninja Turtles," "Billy Bathgate," "Sleeping with the Enemy," "The Last of the Mohicans," "The Fugitive," and "Forrest Gump," among others.

Now, however, North Carolinians can expect over the next few months to hear film producers yelling: CUT us a check or else! (That reminds me; "Production Incentive Experience — Get Your Slice of the Pie!" was the name of the 2012 Association of Film Commissioners International conference’s panel that featured N.C. Film Office director Syrett.)

That process will repeat until responsible legislators tell them: CUT it out!

The legislature recently accomplished a great deal more for the state than a targeted incentive for short-term employers, however glamorous, could ever do. When they voted to CUT corporate taxes and CUT back on overregulation, they produced open-ended incentives to bring in more economic growth, investment, and employment to North Carolina across all industries, not just a select "winner" industry.

Studies in state after state after state after state (including North Carolina) find that film tax credits are net money losers for the host state. Those are newer studies, by the way; my report included the following chart showing earlier studies’ estimates of how much net revenue was lost per dollar spent on film incentives in various states:

Isn’t it time for North Carolina to leave the race to the bottom to other states?

Click here for the Rights & Regulation Update archive.

 

Jon Sanders is an economist studying state regulations, that spreading kudzu of invasive government and unintended consequences. As director of regulatory studies and research editor at the John Locke Foundation, Jon gets in the weeds of all kinds of policy… ...

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