$22 million: that's how much the State of Maryland will be handing to big Hollywood studios, courtesy of Maryland taxpayers. That figure is the total value over three years of a tax credit approved during this year's legislative session. An odd choice, to be sure, given the state's ever-present budget deficit, public pension underfunding, and other major fiscal problems. Of course $22 million is hardly enough to put a dent in these larger issues, but it does give one pause – why, exactly, is the government taking money from your wallet and giving it to the film industry?

To hear lobbyists for the industry explain it, the tax credit will help create jobs, stimulate the local economy, and more than pay for itself in other increased tax revenues. Film crews need lodging, equipment, food, and professional services while performing their work, and judging by the budgets of summer blockbusters, the amounts they are prepared to spend can be significant. So why am I skeptical?

First, like most tax credit programs, there's always a pesky little question: how can we reallyknow if the program is working? That is, how can we know how much film production activity is due to the availability of the tax credit, and how much would have taken place even without it? Simply put, we can't. This makes it tough to evaluate the usefulness of such programs.

Furthermore, this tax credit is particularly egregious. The claims of industry lobbyists are tough to support. Proponents of film production tax credits don't tout them as a way to encourage an increase in film-making overall; rather, they suggest that the tax credits will help lure production away from other states. But if that's true, it means the tax credits don't actually create jobs, they simply shift them from one state to another, and most of those jobs are temporary, ending when production ends. Advocates of Realpolitik might see nothing wrong with such a strategy, but on closer examination, it turns out to be a poor choice on a practical level as well: so many states have been offering similar tax credits that Maryland's program will do little to make it more attractive than its neighbors. With the exception of one or two states that chose to devote hundreds of millions of dollars to the programs, the expansion of film production tax credits across the country has been little more than a beggar-thy-neighbor policy similar to the kind adopted by many nations during the slump in world trading associated with the Great Depression.

Even those states that do manage to set themselves apart from the crowd have encountered problems: legislative analyses conducted in South Carolina and Louisiana suggest that, contrary to the rosy claims of industry lobbyists, states only see about a 20% return in tax revenue for every dollar they devote to such programs. That's not a 20 cent profit on every dollar – it's an 80 cent loss for each dollar spent. Those claiming otherwise usually begin with the dubious assumption that any economic activity related to the film production would not have otherwise occurred.

There's little doubt that the credits are valuable; the question is, valuable to whom? Maryland'scredit is refundable, meaning if the value of the credits exceeds the production company's total tax liability, the state will cut them a check for the difference. Features like this have proven so valuable that a market in credits has evolved, with brokers divvying up credits and trading them, while pocketing hefty transaction fees that further erode what little effectiveness the credits might possess. Then there are the unintended consequences: Iowa's film production tax credit program was plagued by fraud, including representing the purchases of luxury vehicles for producers as necessary expenses, padding of expenses after the fact, and almost total lack of documentation in the form of receipts.

Fortunately, as a recent article in The Economist noted, such tax credits may be on their way out: several states have recently reduced or eliminated their programs, in part because they are facing serious budgetary problems and are looking for places to trim the fat. Unfortunately, Maryland seems to have missed the memo: instead of eliminating its relatively minor rebate program, we've decided to create an even more expensive sequel – and it's bound to be a flop.