by Jon Sanders
Research Editor and Senior Fellow, Regulatory Studies, John Locke Foundation
My research brief this week discusses research from Kennesaw State University economist John Charles Bradbury on film incentives. As I wrote here yesterday, the key takeaway is this: despite what advocates promise, movie production incentives are entirely ineffective policies for growing a state’s overall economy.
As John Locke Foundation’s policy position on North Carolina’s film grants program states:
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.
One of the questions Bradbury researches is essentially this. Suppose a state decides to implement film incentives not thinking it will do anything for the overall economy, but solely to grow the film industry within the state. How generous should that incentive be?
Bradbury found that film incentives only have a weak association with growth in the film industry. They make a difference, but they are still only one of several factors that affect film production location choices.
There is a level of tax credits associated with the industry’s in-state growth, Bradbury found, but higher than that offers no association with any further industry growth.
That level is no greater than 10 percent. Bradbury writes:
Film credits of ten-percent or greater are associated with increased film industry growth; however, raising the credit to a higher level is not associated with further industry growth. States that seek to subsidize the film industry to boost its in-state presence for non-economic reasons—perhaps state residents receive non-pecuniary benefits from having movie stars travel to the state—can attain those benefits with lower levels of tax credits. The estimates indicate that extending the credit to higher levels is not associated further the growth of the film production. … If greater tax credits do not encourage further film production, then they represent an increased transfer to film producers without any corresponding benefit from increased economic activity.
North Carolina’s film grant program currently offers a rebate of qualifying expenses of up to 25 percent.
If Bradbury’s findings are correct, that would mean the rebate North Carolina is offering is two-and-a-half times greater than we would need — and that’s if our program were only about boosting the film industry here.
Since our program is ostensibly about boosting the overall state economy by incentivizing film production, however, Bradbury’s findings join a growing body of research that suggests we should get rid of them altogether as an ultimately ineffective ploy.