Film incentives no winner for NC
Published March 22, 2014
by Donald Bryson, News and Observer, March 21, 2014.
Predictably, filmmakers, television producers and their associated special interest groups immediately sprang into action when the N.C. General Assembly passed a tax reform law in 2013 that would allow the state’s tax credits for film production to sunset Dec. 31, 2014. Not surprisingly, their goal is to preserve these sweetheart tax loopholes for their industry going into 2015 and beyond.
What was surprising, however, was the response by State Commerce Secretary Sharon Decker to this special interest push. Decker announced plans to have legislation ready for the short session of the General Assembly, with hopes that there will be no gap in state film incentives.
Recently, at the N.C. Governor’s Conference on Tourism in Charlotte, Decker, said, “It’s an issue that is a great concern to us because the film industry is very important to North Carolina.” She continued, “It is an industry that has impacted both our cities and our small communities.”
But has North Carolina’s film tax incentive really benefited our economy?
Proponents of the film production tax credit spin this tax loophole as a program to create jobs. Any economic study worth its salt will analyze the effect of the program itself, then analyze the opportunity cost for the same amount of money in a different area. Fortunately, that is exactly what the nonpartisan Fiscal Research Division at the N.C. General Assembly did.
Last year, the Fiscal Research Division analyzed the economic impact of North Carolina’s film production tax credit program for 2011. The analysis concluded that the state awarded $30.3 million in film tax credits during that year, which resulted in 55 to 70 jobs and generated approximately $2 million in personal income.
The analysis concluded that an “across-the-board tax reduction of $30.3 million would have yielded between 370 and 450 new jobs and $14 million in personal income.”
It does not take a degree in economics to determine which of these scenarios creates a better economic outcome for North Carolina.
Decker has fallen for the myth that special interest tax credits and incentives – tax changes designed to steer benefits to a specific industry – are the best way to create jobs. Although targeting benefits in this way often seems like a good idea, such tax credits only lower taxes for a select few and cause distortions in the tax code. By reducing the tax burden of a single targeted industry or company, the marginal tax rate for everybody else increases if overall government spending is not also reduced by the amount of the credit. In other words, tax credits are corporate welfare. All taxpayers bear the cost, but only a handful of special interests and favored industries benefit.
The film tax incentives are not proven job creators or overall government revenue enhancers, despite what proponents say. In state after state, from Connecticut to Louisiana to Ohio, film incentives have been found to be net revenue losers.
And job creation? Iowa, Kansas, Missouri and Wisconsin have two things in common. All four have terminated their film incentive programs – and all four have lower unemployment rates than North Carolina, according to the federal Bureau of Labor Statistics.
If the North Carolina state government is serious about growing the economy and decreasing unemployment, then it should continue on the path that the General Assembly and Gov. Pat McCrory started in 2013. It should widen the tax base by eliminating targeted tax credits and cut overall tax rates instead of subsidizing its favorite industries with tax credits.
The Commerce Department should stick to its mission, which is “to improve the economic well-being and quality of life for all North Carolinians,” instead of trying to pick winners and losers.
Donald Bryson of Garner is the deputy state director for Americans for Prosperity’s North Carolina chapter.
March 22, 2014 at 9:53 am
Rip Arrowood says:
Rutherford County, NC is still benefiting from the the films shot here. "Dirty Dancing" fans still come to visit Lake Lure, the location where the film was shot 25 years ago. Fans of the movie "The Last of the Mohicans" come to Chimney Rock to see the waterfalls. There is no denying that NC needs to attract movie production.
Put a stop to corporate monopolies (Duke Energy) and outlandish offers of incentives like Boeing ($683 million) if you REALLY want the government to quit picking winners and losers.
March 22, 2014 at 10:24 am
Norm Kelly says:
Is Donald Bryson a conservative or just a person with the ability to think?
This is just the first in the long line of incentives that need to go the way of the do-do bird. There should be no picking of winners & losers by the tax code. The only way to have a level playing field is to make the tax rate the same for every entity, with no special deals for anyone. Every entity, person or business, that either lives in NC or chooses to move to NC should be treated exactly the same way. By having an actual level playing field, then every entity can determine if the move to NC is really a worthwhile venture. When libs describe a level playing field, it ALWAYS, ALWAYS involves their chosen friends, buddies, elected few getting treated better than the general population. In this case, as described in this editorial, the rest of the population picks up the tab for the special treatment by the friends of libs.
If the same math is applied to other incentives and give-aways then the conclusion there will logically be the same. When someone artificially benefits then by default, out of necessity, someone else is penalized. While this is SOMETIMES true in the free market/private sector, it is ALWAYS, ABSOLUTELY true in the public sector. The difference is that when it happens in the free market/private sector, I'm not FORCED to participate. If Lowe's home improvement store decides that during the week of lent all Catholics will get an automatic 10% discount, while non-Catholics will pay the extra 10% to make up the difference, then I have a choice to shop at Home Depot for that week and not participate in Lowe's decision to steal money from my wallet. When the government, at any level, makes a policy that steals money from me so they can benefit their chosen friends, I have no choice but to participate. Government agencies even go to the point of making it illegal to choose not to participate. Take socialized medicine phase 1 as an example. Libs & socialists refer to this as Obamacare. They force my premiums to be higher so that I can subsidize someone else's insurance premiums. If I choose not to participate in socialized medicine, the rulers/central planners will punish me financially. I am forced to pay for someone else's premiums. Someone I am not related to. Someone I don't even know. Yet I am paying for them. Out of the money I earn, someone else benefits. Just like other special interests that are friends of some politician. That entity benefits from being a friend of the right person, while I am penalized for not being the chosen one.
What part of this idea makes sense to anyone? Why is it that politicians don't see it this way? Why is it that libs in particular believe this is the way it is SUPPOSED to be? At least when most conservatives call for a level playing field, we can see that they mean everyone is treated the same way by all levels of government interference. When most libs call for a level playing field, they mean special treatment for their friends/chosen ones, and punishment for those who are not their friends/chosen ones.
Lets start with the film industry then let the process move through the rest of state government. Better to start somewhere than nowhere.
March 22, 2014 at 10:48 am
TP Wohlford says:
Well, yes, that such projects failed in other areas -- and in one case that I know of, lead to a bankruptcy of an entire city -- should've been your first clue that this wasn't gonna work.
March 23, 2014 at 10:29 am
Bill says:
I agree with Rip. Norm, if you want to see business in NC - you're going to have to offer incentives.
I highly doubt its the "libs" giving Duke Energy tax breaks - while they continually pollute our rivers!
Was it the "libs" who approved a 9 million dollar STATE incentive for the Ruger gun manufacturing plant- up in Rockingham County? Nope, I think that was the conservative Phil Berger who was right on top of that. Someone who said he was against all business incentives.
Get off your high horse Norm. This is a bipartisan issue. Just because there is "film" before incentive, you think its somehow some liberal conspiracy. Plain and simple - it provides thousands of jobs for North Carolinians - blue collar jobs at that. This isn't some plan to make Hollywood liberals rich. Its a way in which to keep business and new money coming into the state without the need for building infrastructure and the promise of _____amount of jobs over _____of years. This money is spent immediately in the state with far reaching benefits to other businesses as well.
I could but don't want to even address your concerns about Obamacare. That is WAY off subject here.
Donald Bryson's article is full of bad and just flat out wrong information. The "analysis" that the film industry created only 55 - 70 jobs is ludicrous. AT LEAST 55-70 jobs are created with every ONE film that comes into the state and last year there were films shooting in areas all across NC all year round. Approximately 100 - 150 jobs are on each feature film project - and if you have 8 feature projects happening at one time across the state, right there you have close to 1,000 jobs during one period of time.
Mr. Bryson - if you want to know more about the film industry, you need to actually talk to someone who works in the industry in NC and not just state information about some terribly flawed study or an industry you obviously know nothing about.
