The long-awaited, no-opportunity-cost, all-production-is-driven-by-the-incentive study of the North Carolina film incentive by an NC State professor of supply chain management is now out, and it produced a super-multiplier finding quite typical of industry studies:

Beginning in 2007, when the incentive was first enacted, through 2012, the film and television industry has spent $1.02 billion in the state, and generated a projected $170,000,000 in tax revenue. The cost of the credit over the same time period was $112,000,000. The result means that for every dollar of credit issued, the industry generated $9.11 in direct spending and contributed $1.52 in tax revenue back to North Carolina.

What the result really means is that the study’s assumptions should be questioned. Over $9 for ever dollar “invested,” and only government was wise enough to realize this incredible investment opportunity? That simply isn’t believable. It would be the biggest multiplier effect found in NC since the sustainable energy lobby found that the state generated $19.32 for every dollar “invested” in renewable energy (excuse the quotation marks; when tax money is used to support a private industry, politicians call it “investment,” but as the exchange isn’t voluntary, it’s really a coerced wealth transfer from taxpayers to government-favored cronies).

A billion-dollar loss?

For sake of argument, let us ignore the recent Commerce Dept. analysis that found a significant net negative impact for the film incentives of about 19 cents on the dollar. Let us grant this finding and be dismayed. Because by implication, if such findings are to be believed by policymakers, that means that the State of North Carolina wasted money of film incentives when it could have been creating far more economic activity through renewable energy.

Consider (and I got this line of reasoning straight from the president):

  • $112 million paid in film tax credits X 9.11 suggested multiplier effect of film tax credits: $1,020 million
  • $112 million applied instead to renewable energy X 19.32 suggested multiplier effect of renewable energy: $2,164 million
  • Difference: –$1,144 million left on the table by NC stubbornly supporting the wrong industry

Do you think these economic impact studies are accurate? Do you think the State of North Carolina has cost its economy over a billion dollars by favoring Hollywood cronies instead of green energy cronies? Or do you choose to believe one and not the other — and if so, which and on what basis?

Or, just throwing something out for a second, do you choose to believe that a fundamental economic assumption hasn’t suddenly been overturned and that those monumental multipliers are ridiculous?