The True Costs of Film Incentives

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Incentives for film production have been increasingly popular among state governments in the United States. According to a report by Film Production Capital, 22 states gave out an estimated $1 billion in incentives between 2010 and 2014. However, there is relatively little research on the costs of these incentives despite their increasing popularity. There is a broad consensus on the benefits of film incentives to states, but the costs have been largely ignored. What are some of these often-overlooked costs and different types of expenses for each state’s incentive program in order to provide policymakers with more information?

Many states see investment in film production incentivizes as an easy way to create jobs and boost the economy. However, they fail to consider all of the expenses involved with incentivizing film production, such as marketing and administration.

The true cost of having a film incentive is much higher than perceived by many state governments. In fact, there is a multitude of hidden costs that do not get taken into account when considering the cost-benefit analysis behind establishing a film incentive program.  In order to cover these expenses, money often has to be pulled from other programs in the state budget, resulting in a decrease in public services or citizens having to pay more for them.

States often see investment in film production incentivizes as an easy way to create jobs and boost the economy. However, they fail to consider all of the expenses involved with incentivizing film production, such as marketing and administration.

The true cost of having a film incentive is much higher than perceived by many state governments. In fact, there is a multitude of hidden costs that do not get taken into account when considering the cost-benefit analysis behind establishing a film incentive program. Without factoring in all of the costs, it is impossible to determine whether public investment in film production can be viewed as profitable.

There has been a large increase in the number of movies being made in Canada, which can be seen as a direct result of the recent film incentive boom. This should be something to celebrate – more films mean more jobs for talented individuals and a better entertainment industry overall. But this is not entirely true. Despite the fact that there are more jobs for talented technicians, artists, and performers each year (due to the increase in productions), there is still a problem that persists. The Canadian arts community has spoken out about film incentives distorting the market for labor, while others have expressed concerns over the environmental impact of these projects. But perhaps one of the largest ongoing problems with film incentives is their complete lack of transparency.

Film incentives are incredibly difficult to understand and even more difficult to calculate – there is no actual formula that can be used for film incentive calculations since they differ from state to state and country to country. The main problem with the lack of formula is that it is incredibly difficult to determine which generalizations can be made and what needs generalization.

Louisiana is the number one film incentive state in the world,  Although that honor was thought to go to New Mexico, New Mexico is ranked #2. Their actual ranking varies among other sources because of how many different types of incentives they offer and how their incentives are structured.  Louisiana gave the most tax credits and exemptions per capita to filmmakers, with New Mexico following next as a close second.

Although states such as Georgia, New York, and Britain also offer some very large film incentive packages; those packages tend to be burdened with more red tape than other programs making them more difficult to get approved. Therefore, these large incentive packages do not end up producing the same return on investment that the smaller packages in Louisiana and New Mexico provide.

Louisiana‘s film incentives are seen as very effective because of how simple they are to administer. The governor of Louisiana recently announced their latest round of film incentives where it was revealed that upwards of 270 production companies were in Louisiana to take advantage of their incentives.

Although New Mexico‘s film incentives are also quite easy to administer, the sheer number of cities and counties in the state have made it difficult for filmmakers to know where they can get their film made exempt from taxation or receive a transferable tax credit. This has meant that there were less productions in the state than would be expected.

New Mexico and Louisiana‘s film incentives have been so successful that surrounding states such as Texas and Wisconsin have also offered their own versions of film incentives. Even Australia has emulated Louisiana by offering film incentives to international filmmakers, but those costs come out of the Australian taxpayer’s pockets.

 

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