Don’t Give Handouts to Hollywood

Movie production incentives and subsidies amount to little more than corporate handouts.

Colorado state officials searching for ways to jumpstart the economy and lower the unemployment rate are taking a hard look at movie production incentives.

These incentives aim to lure film companies to Colorado by offering subsidies, corporate tax credits and/or special tax rebates for film companies.

Who doesn’t want to work on a movie set? The films bring jobs. And the more films that are shot in Aspen and Denver, the more tourism and economic growth the state will see, right?

Unfortunately, no. For taxpayers, movie production incentives and subsidies amount to little more than corporate handouts.

This spring, Gov. John Hickenlooper tapped Hollywood producer Donald Zuckerman to serve as chief of the Colorado Office of Film, Television and Media. And later this year, Zuckerman is expected to unveil an aggressive new program to entice film productions to Colorado.

Meanwhile, state Rep. Tom Massey (R-Poncha Springs) has been pushing various forms of movie production incentive legislation for seven years. His latest attempt (HB 11-1207) would’ve created a 10-cent tax on every movie ticket sold. The money would’ve been doled out to companies shooting their movies here.

But, after meeting fierce resistance and being accused of trying to circumvent the Taxpayers Bill of Rights (TABOR), Rep. Massey changed the fee to voluntary 10-cent donations to the movie fund.

Over the last decade, movie production incentives became quite popular. They were adopted in 44 states, plus the District of Columbia and Puerto Rico. However, it has become clear to many of those states that movie incentives are little more than corporate welfare. Washington State just let its film incentives expire altogether at the beginning of July.

In these tough fiscal times, Washington lawmakers determined giving money to moviemakers was low on their priority list. Today, 17 states are considering scaling back or eliminating their recently established movie incentive programs.

In New Mexico, Gov. Susana Martinez has sought to limit film handouts, calling them a “subsidy to Hollywood on the backs of our schoolchildren.”

Michigan is also winding down its movie incentive program and serves as the best cautionary tale. In 2008, Michigan adopted some of the most aggressive film incentives in the country, offering unlimited credits for 30-50 percent of personal expenditures while in the state making the movie, credits for up to 42 percent of production expenditures and 25 percent of infrastructure investments.

A fall 2010 report by the state’s Senate fiscal agency found Michigan is losing tens of millions of dollars on the movies and “will never be able to make the credit ‘pay for itself’ from a State revenue standpoint, even when the credit generates additional private activity that would not have otherwise occurred.”

Saying the program doesn’t “pay for itself” is an understatement. In 2009-10, Michigan taxpayers spent a projected $100 million to generate $59.5 million in movie company activity, a loss of $40.5 million.

Unable to justify the financial losses, Michigan lawmakers are negotiating a cap on the program that would limit taxpayer spending on movie incentives. The response? Production companies are fleeing Michigan for other states willing to give them gifts at taxpayers’ expense.

Colorado can and should create an environment that lures new businesses and brings sustainable job growth. But with a $450 million state budget deficit in 2012 expected, handouts to Hollywood are not the answer.

Instead, lawmakers should eliminate the subsidies and regulations that favor industries, creating level playing fields.

By generating an economic environment that encourages competition and entrepreneurship, Colorado will be able to attract companies interested in bringing long-term jobs to the state, and not just movie companies looking to fleece taxpayers and leave town.

Harris Kenny is a Denver-based policy analyst for the Reason Foundation and wrote this article for the Independence Institute, a free-market think tank in Golden.

This op-ed was published in the July 29-August 4 print edition of the Denver Business Journal and first appeared online here.