Hollywood handouts may soon be a thing of the past. For decades some states have been offering “film credits” to entice directors to shoot movies within their borders. The theory behind this is that film production will boost the local economy and create jobs for local residents. And Hollywood certainly enjoys the preferential tax treatment.
Unfortunately, according to The Tax Foundation, these credits do not pay off for the state. The credits are often overly generous -- Michigan offered a 42% production credit -- and stimulate far less economic activity than proponents claim. Any jobs that are created are temporary in nature and do not lead to any long-term betterment for residents.
According to the Tax Policy Blog, Michigan, Iowa, Arizona, and New Jersey are all suspending their film tax credits. Considering the dire state of many states’ economies and budgets, I would not be surprised to see more states following suit.
Read more about film tax credits here and see Hollywood’s response here.