Conservative commentators frequently depict Hollywood as ridden with leftists, but the reality is that, when it comes to tax policy, the movie industry is no different from any other. Take recent legislative activity in Michigan and Georgia, for example. Michigan Governor Jennifer Granholm is on the verge of signing a bill that would, among other things, provide a refundable tax credit equal to 42 percent... 42 percent!... of a film production's costs. The Georgia Senate has adopted a measure - also expected to be signed into law - that will more than double that state's current film production credit.
Yet, as an important new report from the Massachusetts Department of Revenue (DoR) documents, states may receive precious little in return for these enormous investments. According to the report, Massachusetts will lose upwards of $140 million between 2006 and 2008 due to its film tax credit, but may receive only about $20 million in new revenue from the economic activity associated with the credit. What's more, as the report notes, "any estimate of the net economic and tax revenue impact of tax incentives needs to take into account the reduction in state government spending" associated with such credits. In such tight budgetary times, that "reduction in government spending" is sure to occur if policymakers keep trying to lure the latest blockbuster to their state.