When movies are made in Thomasville, Ga., it welcomes celebrities and an infusion of cash. But the financial incentives that attract studios have cost the state billions.
It is no wonder that moviemakers saw potential in Thomasville, Ga., as a stand-in for Main Street U.S.A. Cobblestone streets and mom-and-pop stores speckle the downtown of this city of 18,000 that is caked in red clay soil and nestled among rolling hills.
Just as attractive to some of those producers are Georgia’s lavish filming incentives, which have made Thomasville a cost-effective place to make modest pictures with major stars. Dustin Hoffman came for the rom-com “Sam & Kate.” A children’s book adaptation, “The Tiger Rising,” brought Dennis Quaid and Queen Latifah to town.
But what is good on the ground for local economies — Thomasville says each of the six movies filmed there has provided an economic boost of about $1 million — can simultaneously be a drain on state coffers.
Some Georgia lawmakers wondered whether it might be wise to put some limits on an uncapped tax incentive program that has given billions of dollars to Hollywood studios, scrambling this week in hopes of passing a bill that would modify the program.
How much money have states been spending?
Over the last 20 years, states have given movie and television productions more than $25 billion in filming incentives. Thirty-eight states currently offer some form of incentive. Georgia’s lauded program has poured more than $5 billion into Hollywood since 2015. New York has spent at least $7 billion, and California has dedicated more than $3 billion to try to retain productions.
Why do states want to encourage filming?
Supporters of film incentives see them as an engine for job creation. After all, when productions come to town, they need electricians, hair stylists and many other crew members to make movie magic. Productions also spend money while working — money that trickles through local economies to hotels, diners and dry cleaners.
Are there any downsides?
Incentives can be effective at luring projects. But economists warn that using them to do so is very expensive and offers minimal bang for your buck. Study after study has found that the tax revenue generated by film incentive programs is a quarter, or even a dime, of every dollar invested. In some programs, each job that is directly created can cost taxpayers more than $100,000.
And yet states are handing out cash?
Incentives come in different forms. Many states do offer cash rebates or grants, which are paid out directly to production companies. Other states give some form of a tax credit. Depending on the state, tax credits can be used toward tax liability, converted into a refund or sold.
Wait, studios sell their tax credits?
Yes. Many states offer a transferable tax credit. Studios can then sell those credits to companies with high state-tax liabilities. By selling them, often at a slight discount, studios can cash out and buyers can receive modest tax relief. As a result, companies with minimal ties to the entertainment industry have become a hidden part of the incentive ecosystem.
Who’s buying these credits?
Companies like Best Buy, U.S. Bank and Dr Pepper buy these tax credits from productions. High-net-worth individuals also sometimes purchase them. Consider one example: The production company behind “The Trial of the Chicago 7” received a $5.2 million tax credit from New Jersey that it sold to Apple Inc. for $4.8 million.
Can we track where all this money is going?
It’s hard. This process involves vast sums of tax revenue that states are owed but never collect. Because the money does not come into the state treasury to begin with, it is less obvious that the revenue has been lost. And that can make transferable tax credits politically palatable.
Stuffy meetings about abstract budget crunching can feel like distant concerns in Thomasville, a bastion for quail hunters that is much closer to Tallahassee, Fla., than to Atlanta. To residents, the evidence that the state’s film subsidies are a boon to business is as clear as day.
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Source: Elections - nytimes.com
