Watch Out Hollywood! Here Comes? Colorado?

Last Friday Colorado Sen. Nancy Spence (R-Centennial) and Rep. Tom Massey (R-Poncha) introduced the Movie Ticket Fee for Film Incentives Bill.

The bill, HB 11-1207, would impose a 10-cent fee on every movie ticket sold in Colorado to incentivize film production in the state. The fee would go into place on July 1, 2011 and would be collected by movie ticket vendors in addition to the existing sales tax. Movie ticket fee revenue would be held in a “creative industries cash fund” managed by the Colorado Office of Film, Television and Media.

According to The Denver Post, the program would offer movie production companies a 10% cash rebate for costs on films produced in Colorado. In order to be eligible for the incentive:

  • A Colorado-based production company must spend at least $100,000 on the film project;
  • An out-of-state production company must show at least $250,000 on qualifying in-state expenses for the film project;
  • And regardless of where the production company is based, at least 25% percent of the workers on the film project must be Colorado residents.

Section 4 of the bill concludes:

“The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health and safety.”

It is unlikely that HB 11-1207 would transform the Colorado film industry to the point where it could compete with Hollywood, Mumbai or even Toronto. And the argument that a moviegoer subsidized Colorado film industry is “necessary for the immediate preservation of the public peace, health and safety” is tenuous at best.

According to the nonpartisan Tax Foundation, movie production incentives (MPIs) and film tax credits are “lackluster policy.” Specifically, a 2010 Tax Foundation study found:

  • MPIs attract mostly temporary jobs from transplanted out-of-state workers;
  • In-state jobs that MPIs create are also temporary, and have “limited options for upward mobility;”
  • MPIs encourage job training in fields dependent on further government subsidies, rather than fields with sustainable demand in the marketplace;
  • Forty-four states offer significant MPIs, meaning that competition transfers potential gains to the movie industry and not local businesses; and
  • MPIs touted benefits are often speculative, and they rarely face appropriate oversight or cost-benefit analysis.

Overall the study found:

“Based on fanciful estimates of economic activity and tax revenue, states are investing in movie production projects with small returns and taking unnecessary risks with taxpayer dollars… [And] it is unlikely that (MPIs) generate wealth in the long run. Most fail even in the short run.”

Colorado lawmakers should instead focus their energy on streamlining government, reducing burdensome regulations and cutting spending to promote sustainable growth. For example, last month Sen. Ted Harvey (R-Highlands Ranch) introduced SB 11-065, which would deregulate the state’s taxicab industry. (See my full write-up on SB 11-065 here.)

For more examples meaningful government reform, check out the recently released State Budget Reform Toolkit.