This past summer, the American Review of Public Administration published a study of tax incentives for movie studios and their influence on economic development. Well, actually, on their lack of influence on economic development. The study by USC political scientist Michael Thom found:
Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages. Refundable tax credits had no employment effect and only a temporary wage effect. Neither credit affected gross state product or motion picture industry concentration. Incentive spending also had no influence.
Unsurprisingly, the MPAA — which is an active lobbying group across the country for tax credits and other incentive programs that benefit Hollywood — did not like the paper (nor a sister study from Thom in American Politics Research published last month). On Monday, the MPAA released a commentary of sorts picking apart Thom’s paper, but without directly debunking the findings. As Joe Henchman wrote on the Tax Foundation’s blog: “the [MPAA] author makes a solid effort to find problems with the Thom articles, but they fall short of a refutation.
I recommend reading the whole paper (if you have journal access) as well as Henchman’s blog post on the scuffle.
Based on NCSL’s list of current tax incentive programs from April 2016 (detailed below in a map put together by the Hollywood Reporter), the market distorting tax credits are still popular among several states. Though, as was the impetus for the Thom study, these more recent trend is for the curtain to come down on these programs than for them to be renewed. For example, Michigan was very proud of its incentive program that brought films such as Transformers: Age of Extinction and the Red Dawn remake… until the pressure from studios failing and the lack of robust job growth led the state to leave the program on its budgetary cutting room floor. It’s worthwhile for the states highlighted on the map below to consider doing the same.