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Film Subsidies are a Flop

by Marc Kilmer

MARCH 26, 2012 Bookmark and Share

When the budget it tight, you’d expect legislators to scour the budget to find ways to cut programs that are wasteful, right? If you’ve been watching our state’s General Assembly, you know that this isn’t a serious question. Just how unserious our legislators are about cutting spending is proven by the fact that in light of record-breaking tax increases, the state senate is seriously considering expanding corporate welfare to film producers.

As I’ve written about previously, the economic rationale behind film subsidies is very, very weak. There’s just not any evidence that they create jobs or boost tax revenue. In fact, this is one of the areas that very liberal economists and very conservative economists have little disagreement. Joseph Henchman of the Tax Foundation sums up the consensus about subsidies: “While some benefits accrue to in-state filmmakers and suppliers, on the whole they are a net transfer from taxpayers to out-of-state production company beneficiaries.”

A 2010 report by the Michigan Senate on Michigan’s film subsidies found that:

…the State spent $37.5 million in FY 2008-09 to generate $21.1 million in private sector activity and will have spent $100.0 million in FY 2009-10 to generate $59.5 million in private sector activity. It is estimated that the additional economic activity from the credits will have generated an additional $3.7 million in tax revenue during FY 2008-09 and $10.3 million in FY 2009-10.

So Michigan spent more money than the film incentives created in economic activity. Does that sound like a good deal to anyone except those who are financing the films? It certainly seems there are much more efficient ways for the state to bolster economic activity than spending $37.5 million to generate $21.1 million. (There’s also evidence that this report may be overstating the benefits the state received from film production, so the subsidies may even be a worse deal than these figures indicate.)

If there is one good thing about the plan to expand Maryland’s film subsidies, it exposes the complete lack of economic common sense in the General Assembly. One report of the senate committee hearing on this legislation noted, “The bill had no opposition during the hearing at Kasemeyer’s committee, and senators asked no questions.”

Really? No questions about a corporate welfare program that pretty much any even-handed economic analysis finds is either completely wasteful or, at least, highly inefficient? Not a single senator spoke up and asked, “hey, Mr. Chairman, I know you support this bill, but have there been any studies done by academics not tied to the film industry that show these subsidies do any good?”

The lack of skepticism about what is a pretty clear case of wasteful corporate welfare should be a flashing red light to the taxpayers of Maryland. If the state wants to save money, getting rid of this type of program should be a very easy way to do it. The economic benefits of the subsidies are non-existent, the subsidies almost solely benefit wealthy film producers, and the state is having just a little bit of a budget problem. So let’s pick some low-hanging fruit here and axe the subsidies. Easy, right?

In Maryland, however, that’s not the case. In a previous post I noted there was a whole lot of waste in the budget that passed the state senate, each item standing as a stark rebuke to legislators who said that they couldn’t cut any more spending and had to raise taxes. Now we have a senate panel where not a single senator questions giving away even more money to wealthy movie producers. I’m seriously depressed about the level of leadership or basic economic knowledge that our legislators exhibit.


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