Policy Position

Film Grants

in Budget, Taxation, and the Economy

Introduction

“Bull Durham,” “Last of the Mohicans,” “Dirty Dancing,” and most other beloved “North Carolina films” were produced without film production grants. They were made years before state officials ever thought the industry required government help.

Several features make North Carolina an attractive location for filming. It offers a diverse climate, rural to urban landscapes, mountainous to coastal terrain, a cornucopia of settings, and a good production infrastructure. It’s also a right-to-work state with competitive wages and cost-of-living.

Finally, a series of major reforms reducing tax rates (including the corporate income tax), state spending growth, and intrusive red tape have made North Carolina an even more highly attractive place to do business, invest, and relocate. A more free business climate is a powerful incentive to untold numbers and kinds of business enterprises creating domestic jobs.

Lower cost of doing business is good for business, and by extension, it’s good for job creation, investment, and the state’s economy. But the message behind the North Carolina Film and Entertainment Grant fund is this: We only want this kind of business to enjoy a lower cost of doing business. Other established, domestic businesses would have a comparably higher cost of doing business.

North Carolina started offering film production tax credits in 2005 as an open-ended subsidy offering up to $7.5 million per production. Lawmakers greatly expanded it in 2010 to offer up to $20 million per production.

The tax credit was repealed in 2014. It was replaced by a modest grant program of $10 million that has already been increased to triple its original size ($31 million). The film grant program offers a rebate of up to 25 percent of qualifying expenses with differing maximum credits for TV series ($12 million), feature films ($7 million), and commercials ($250,000).

Key Facts

  • Unlike other economic incentive programs, film grants don’t require recipients to earn them over time by hitting specific local job-creation targets or fulfilling other long-term promises. When the project is over, the grant money is gone and so are the jobs.
  • The biggest beneficiaries of the film grants are outside film production companies — even if they don’t produce in North Carolina. They can pit North Carolina’s “bid” for film productions against other states’ bids (and foreign nations’, too).
  • This bidding war turns into a race to the bottom. The grant is never enough. Pressure is always on to increase state incentives for film productions (as has been happening in North Carolina).
  • State programs to incentivize film productions are relatively new. In 2002, only four states had them. At their peak in 2009, only six states didn’t have them. As state governments studied the returns on their film incentives, however, they found they were net money losers. So more and more states are choosing to get out of the losing game entirely. By 2018, the number of states not offering film incentives had more than tripled, to 19.
  • In 2014, the North Carolina Department of Commerce found a net “negative budgetary impact” of the film incentives, with the state getting a return of just over 19 cents per dollar of tax credit given.
  • Recent peer-reviewed research shows that state film incentive programs have no impact on their states’ economies or industries, basically benefitting only outside film production companies and current workers.
  • Thanks in part to recent tax and regulatory reforms, North Carolina boasts a freer business climate, a vibrant economy, and lower costs of doing business. Those are appealing factors to add to the state’s many natural amenities in attracting outside film productions. Importantly, they’re already attracting hosts of other business endeavors that will be here for the long haul.
  • State leaders should ignore, not reward, outside film productions’ demands for higher incentives bids in their search for a state to pay them for their short-term business endeavors.

Recommendations

  1. End the film production grant program.
  2. Let the state’s significant, across-the-board pro-growth reforms attract outside film productions, as they do for long-term business enterprises.

Data

Donate Today

About John Locke Foundation

We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

The John Locke Foundation is a 501(c)(3) research institute and is funded solely from voluntary contributions from individuals, corporations, and charitable foundations.