U.S. Shouldn't Protect Hollywood

PolicyMic writer Jack Fischl argues that foreign countries are stealing American film jobs because they offer lucrative incentives. Fischl opines that the government should enact policies to protect the film industry saying, “It's time for the U.S. to start a tax war.”

This is the kind of protectionist mindset that gets countries into trouble. We only need to look at the states, which are already engaged in protectionist trade policies over the film industry, to see why Fischl’s policy prescription does not work. More than 40 states offer film subsidies (usually targeted tax credits), which result in more harm than good.

State governments ultimately lose money when they provide such subsidies. They tend to spend more attracting filmmakers with tax credits than they get back in tax revenues. Wisconsin gave $4.6 million in tax credits to the producers of Public Enemies, but the film generated merely $270,000 in state tax revenue. Additionally, a commission on Missouri tax credits recently found that the state’s film tax credit program “serves too narrow of an industry and fails to provide a positive return on investment to the state,” and recommended that the program be eliminated. 

To make matters worse, film tax credit programs do not produce the jobs and economic activity they promise. In fact, in several states, fewer people are currently employed in the movie industry than before the state began to provide film subsides. These subsidy programs fail to promote long-term employment since many filmmakers pack up their sets and leave the state as soon as they wrap up shooting. State and local economies would be better off if they attracted permanent jobs that are better paying and do not need to be inflated with taxpayer subsidies.

There are more cost-effective ways to create jobs than through film tax credit programs. The Wisconsin Department of Commerce found that it costs 20 times more to create a job using the state’s film tax credit program than it does using other programs. If policymakers are truly focused on promoting job growth, they should look at implementing a different policy.

Film tax credits do not equate to free money; they come from the pockets of taxpayers. Cash-strapped state and local governments face a big opportunity cost: If they funnel more money to the film industry, they have less to spend on important items, such as roads and schools. Film tax credits are simply handouts to an industry that already enjoys favor, and only exemplifies government’s continued picking of winners and losers in the economy. Why is the film industry more deserving of state subsidy than other industries? The government should not favor the film industry just because it has more glitz and glamour. 

If America is not the best at making movies anymore, then that is just fine. We can shift our focus to producing other top-quality goods and services. It is a sign of innovation and progress, and it is a great thing for consumers. If a film were made abroad, Americans would only have to pay the price of a movie ticket to see it rather than financially support an entire industry with their tax dollars.

Photo Credit: gabrieldeurioste