If there's anything worse than jumping on a bandwagon, it's jumping on a bandwagon after everyone else and their cousins are aboard and it's broken down in a ditch with two flat tires and a shattered axle.
Handing-out tax "incentives" (read bribes) to filmmakers was quite the fad a few years back. A bunch of states, all dreaming of becoming "another Hollywood," jumped aboard the bandwagon, each trying to outdo the other in throwing taxpayer money at television and movie producers. And this seemed to "work" well enough for some of the star-struck states, at least from the filmmaker's vantage point, since most people are more than happy to take money that's thrown their way.
But regular readers of this blog know that Hollywood handouts have been a losing long-term proposition for most states, generating little lasting return on investment and only a short-term economic bump, while lending themselves to abuse and fraud. Most "studies" commissioned by handout backers show benefits; but more objective research indicates that the primary beneficiaries are those getting the subsidies, not those giving them. Why Colorado would want to jump aboard this broken-down old bandwagon is a mystery, at a time when many states that pioneered this new kind of corporate welfare are having second thoughts and backing away. And why two Colorado Republicans would be pushing this is even more baffling, if they're hoping to rehabilitate the party's reputation for fiscal responsibility.
Proponents of the idea want to slap a tax on movie tickets to fund the subsidies, which seems self-defeating, given that higher ticket prices are likely to result in lower attendance and reduced profits for some of the same filmmakers these "incentives" are supposed to help. Filmmakers may shrewdly prefer to get some cash up-front, given the box-office bombs so many of them bring to the big screen, but forcing all movie fans to bankroll the select few production companies that would get the subsidies is unfair and counterproductive.
Even The Denver Post recognized this as a dumb idea. Let's hope a majority of legislators will too.
Showing posts with label Hollywood handouts. Show all posts
Showing posts with label Hollywood handouts. Show all posts
Tuesday, February 15, 2011
Sunday, November 21, 2010
Hollywood Handouts Revisited
It's time to revisit one of my biggest corporate welfare pet peeves: the bribes that a significant number of states pay to movie and television production companies that shoot in those states.
A few conservative think tanks have taken aim at these "incentives," including Michigan's Mackinac Center, but the critiques might get more traction with the "mainstream media" coming from a left-leaning think tank like the Center on Budget and Policy Priorities, which just published a damning analysis of the effectiveness (or ineffectiveness, in this case) of Hollywood welfare programs.
Here are the key findings:
State film subsidies are costly to states and generous to movie producers. Today, 43 states offer them, compared to only a handful in 2002. Over the course of state fiscal year 2010 (FY2010), states committed about $1.5 billion to subsidizing film and TV production — money that they otherwise could have spent on public services like education, health care, public safety, and infrastructure. The median state gives producers a subsidy worth 25 cents for every dollar of subsidized production expense. The most lucrative tax subsidies are Alaska’s and Michigan’s, 44 cents and 42 cents on the dollar, respectively. Moreover, special rules allow film companies to claim a very large credit even if they lose money— as many do.
Subsidies reward companies for production that they might have done anyway. Some makers of movie and TV shows have close, long-standing relationships with particular states. Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway. But there is no practical way for a state to limit subsidies only to productions that otherwise would not have happened.
The best jobs go to non-residents. The work force at most sites outside of Los Angeles and New York City lacks the specialized skills producers need to shoot a film. Consequently, producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work — hair dressing, security, carpentry, sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong economic development in the long term.
Subsidies don’t pay for themselves. The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.
No state can “win” the film subsidy war. Film subsidies are sometimes described as an “investment” that will pay off by creating a long-lasting industry. This strategy is dubious at best. Even Louisiana and New Mexico — the two states most often cited as exemplars of successful industry-building strategies — are finding it hard to hold on to the production that they have lured. The film industry is inherently risky and therefore dependent on subsidies. Consequently, the competition from other states is fierce, which suggests that states might better spend their money in other ways.
Supporters of subsidies rely on flawed studies. The film industry and some state film offices have undertaken or commissioned biased studies concluding that film subsidies are highly cost-effective drivers of economic activity. The most careful, objective studies find just the opposite.
Such findings aren't sitting well with many in Hollywood, according to the Los Angeles Times, who until now could dismiss them as the nit-picking of fiscally-conservative fussbudgets. Now they simply dismiss the conclusions as "slipshod" and "politically-motivated," although most Tinseltown liberals would be hard pressed to explain how CBPP's politics differ from their own.
The truth always hurts -- but no more so than when it comes from natural allies.
Colorado legislators flirted in recent years with embracing such incentives, lead, in at least one case, by a fiscally-conservative Republican, but ultimately demurred. We ought to be glad this idea ended-up on the cutting room floor.
A few conservative think tanks have taken aim at these "incentives," including Michigan's Mackinac Center, but the critiques might get more traction with the "mainstream media" coming from a left-leaning think tank like the Center on Budget and Policy Priorities, which just published a damning analysis of the effectiveness (or ineffectiveness, in this case) of Hollywood welfare programs.
Here are the key findings:
State film subsidies are costly to states and generous to movie producers. Today, 43 states offer them, compared to only a handful in 2002. Over the course of state fiscal year 2010 (FY2010), states committed about $1.5 billion to subsidizing film and TV production — money that they otherwise could have spent on public services like education, health care, public safety, and infrastructure. The median state gives producers a subsidy worth 25 cents for every dollar of subsidized production expense. The most lucrative tax subsidies are Alaska’s and Michigan’s, 44 cents and 42 cents on the dollar, respectively. Moreover, special rules allow film companies to claim a very large credit even if they lose money— as many do.
Subsidies reward companies for production that they might have done anyway. Some makers of movie and TV shows have close, long-standing relationships with particular states. Had those states not introduced or expanded film subsidies, most such producers would have continued to work in the state anyway. But there is no practical way for a state to limit subsidies only to productions that otherwise would not have happened.
The best jobs go to non-residents. The work force at most sites outside of Los Angeles and New York City lacks the specialized skills producers need to shoot a film. Consequently, producers import scarce, highly paid talent from other states. Jobs for in-state residents tend to be spotty, part-time, and relatively low-paying work — hair dressing, security, carpentry, sanitation, moving, storage, and catering — that is unlikely to build the foundations of strong economic development in the long term.
Subsidies don’t pay for themselves. The revenue generated by economic activity induced by film subsidies falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.
No state can “win” the film subsidy war. Film subsidies are sometimes described as an “investment” that will pay off by creating a long-lasting industry. This strategy is dubious at best. Even Louisiana and New Mexico — the two states most often cited as exemplars of successful industry-building strategies — are finding it hard to hold on to the production that they have lured. The film industry is inherently risky and therefore dependent on subsidies. Consequently, the competition from other states is fierce, which suggests that states might better spend their money in other ways.
Supporters of subsidies rely on flawed studies. The film industry and some state film offices have undertaken or commissioned biased studies concluding that film subsidies are highly cost-effective drivers of economic activity. The most careful, objective studies find just the opposite.
Such findings aren't sitting well with many in Hollywood, according to the Los Angeles Times, who until now could dismiss them as the nit-picking of fiscally-conservative fussbudgets. Now they simply dismiss the conclusions as "slipshod" and "politically-motivated," although most Tinseltown liberals would be hard pressed to explain how CBPP's politics differ from their own.
The truth always hurts -- but no more so than when it comes from natural allies.
Colorado legislators flirted in recent years with embracing such incentives, lead, in at least one case, by a fiscally-conservative Republican, but ultimately demurred. We ought to be glad this idea ended-up on the cutting room floor.
Monday, September 21, 2009
Lights, Camera, Corruption
Regular readers know how much I loath corporate welfare of every stripe -- and Hollywood welfare especially. So they'll understand how delighted I am to pass along news of a mini-scandal hitting Iowa's film "incentives" program.
An 11th-hour orgy of tax credit claims, timed to beat a rules change that capped the handouts at (a mere) $50 million annually, drove program costs well above the $300 million mark last year, according to media reports -- even while an ongoing audit indicates the program is being abused. It appears that some tax credits were used to purchase at least two luxury vehicles, a Mercedes and Land Rover, unrelated to film projects. This led to last Friday's resignation of the state's economic development director, and paid leave for the man who hands out the checks to fat cat filmmakers.
Reports the DesMoines Register:
"On Friday, questions about the state's film program led state economic development leader Mike Tramontina to resign. The state's film manager, Tom Wheeler, has been placed on paid administrative leave.
A memo, written by Tramontina, said an independent auditor found lax oversight of film producers' spending in Iowa. The state gives producers back half of what they spend in Iowa in tax credits. Among the complaints: Film producers claimed tax credits for luxury vehicles they bought for themselves."
It's extremely concerning," said [State Sen. Joe] Bolkcom. "We have this program that grew extremely fast, on top of what seems to be an appalling level of oversight."
Gov. Chet Culver suspended the tax-credit program Friday, saying in a statement that he was troubled by the findings. Culver spokesman Troy Price said Saturday that the audit is ongoing and could not be released."
Here's a link to the memo that prompted Culver to suspend the program.
Given the way Iowa and other star-struck states have been throwing money at moviemakers, trying to land more location shoots, it was only a matter of time before such abuses began to surface. Maybe this will help take some of the shine off the latest craze in corporate welfare.
See earlier posts for more on this topic: here, here,
An 11th-hour orgy of tax credit claims, timed to beat a rules change that capped the handouts at (a mere) $50 million annually, drove program costs well above the $300 million mark last year, according to media reports -- even while an ongoing audit indicates the program is being abused. It appears that some tax credits were used to purchase at least two luxury vehicles, a Mercedes and Land Rover, unrelated to film projects. This led to last Friday's resignation of the state's economic development director, and paid leave for the man who hands out the checks to fat cat filmmakers.
Reports the DesMoines Register:
"On Friday, questions about the state's film program led state economic development leader Mike Tramontina to resign. The state's film manager, Tom Wheeler, has been placed on paid administrative leave.
A memo, written by Tramontina, said an independent auditor found lax oversight of film producers' spending in Iowa. The state gives producers back half of what they spend in Iowa in tax credits. Among the complaints: Film producers claimed tax credits for luxury vehicles they bought for themselves."
It's extremely concerning," said [State Sen. Joe] Bolkcom. "We have this program that grew extremely fast, on top of what seems to be an appalling level of oversight."
Gov. Chet Culver suspended the tax-credit program Friday, saying in a statement that he was troubled by the findings. Culver spokesman Troy Price said Saturday that the audit is ongoing and could not be released."
Here's a link to the memo that prompted Culver to suspend the program.
Given the way Iowa and other star-struck states have been throwing money at moviemakers, trying to land more location shoots, it was only a matter of time before such abuses began to surface. Maybe this will help take some of the shine off the latest craze in corporate welfare.
See earlier posts for more on this topic: here, here,
Thursday, July 23, 2009
Lights, Cameras, Backlash
Whether or not it makes economic sense, Hollywood's invasion of the American hinterland, in search of taxpayer handouts, is driven on by a second factor -- the thrill some Americans get from any brush with celebrity. So star struck are some of us, apparently, that we'll gladly pick our own pockets to help pay the freight for Hollywood fat cats and wealthy film studios, just to say that a "star" came to town or that we served as props in some direct-to-DVD box office flop.
But the thrill seems to be wearing off in Las Vegas, New Mexico, a town that's become a magnet for movie-makers thanks to a retro ambiance and generous tax breaks offered by the state. A backlash appears to be building there and elsewhere against arrogant Hollywood invaders and the inconveniences they bring. Not everyone enjoys the fruits of the economic windfall they purportedly bring the state. And some "townies" have gone from welcoming to resentful.
Reports the L.A. Times:
"The filming has brought in a surge of money, but it has also brought tension. Store owners in Las Vegas, complaining that filming hurts their businesses, have clashed with film supporters, even calling for a moratorium on all productions.
As more and more movie production leaves California, sensible small towns across the country are getting a taste of Hollywood glitz -- and it isn't always sweet. "They act like they own the town," said Bob Korte, the owner of Korte's Furniture and Bicycles, who helped lead the effort in Las Vegas.
Other towns in New Mexico have moved to control filming, including Village of Los Ranchos de Albuquerque, which banned production after neighbors complained about disruption when several television shows filmed there."
It remains to be seen whether the backlash will spread to the 40 other states that have jumped on the Hollywood welfare bandwagon, each vying with the others to see who can pour more taxpayer money into the pockets of movie moguls. So strong is the public's fascination (or is it "obsession"?) with celebrity that it may take years before the thrill wears off elsewhere -- and average Americans begin to seriously question whether subsidizing movie-makers makes dollars or sense.
Until then, Hollywood will squeeze everything it can out of the suckers out here in "fly-over country."
But the thrill seems to be wearing off in Las Vegas, New Mexico, a town that's become a magnet for movie-makers thanks to a retro ambiance and generous tax breaks offered by the state. A backlash appears to be building there and elsewhere against arrogant Hollywood invaders and the inconveniences they bring. Not everyone enjoys the fruits of the economic windfall they purportedly bring the state. And some "townies" have gone from welcoming to resentful.
Reports the L.A. Times:
"The filming has brought in a surge of money, but it has also brought tension. Store owners in Las Vegas, complaining that filming hurts their businesses, have clashed with film supporters, even calling for a moratorium on all productions.
As more and more movie production leaves California, sensible small towns across the country are getting a taste of Hollywood glitz -- and it isn't always sweet. "They act like they own the town," said Bob Korte, the owner of Korte's Furniture and Bicycles, who helped lead the effort in Las Vegas.
Other towns in New Mexico have moved to control filming, including Village of Los Ranchos de Albuquerque, which banned production after neighbors complained about disruption when several television shows filmed there."
It remains to be seen whether the backlash will spread to the 40 other states that have jumped on the Hollywood welfare bandwagon, each vying with the others to see who can pour more taxpayer money into the pockets of movie moguls. So strong is the public's fascination (or is it "obsession"?) with celebrity that it may take years before the thrill wears off elsewhere -- and average Americans begin to seriously question whether subsidizing movie-makers makes dollars or sense.
Until then, Hollywood will squeeze everything it can out of the suckers out here in "fly-over country."
Thursday, July 2, 2009
Director Defends "Public Enemies" Tax Heist
Gangster John Dillinger, subject of the new Johnny Depp movie "Public Enemies," needed a machine gun to get his hands on other peoples' money. Not so Michael Mann, the film's director. All he and other filmmakers need to pull off a heist is to flash a little Tinseltown glitz and say the magic word -- "jobs" -- and star-struck state legislators will roll out the red carpet and open other peoples' wallets for them.
Many states now pay film industry subsidies, which strikes me as the most egregious form of corporate welfare there is (as I've blogged about before). And those states that don't are feeling intense pressure to jump on the bandwagon. Even flat-busted-broke California is getting into the act, launching a new program that will give $500 million in tax breaks to movie-makers over the next 5 years.
But it's debatable whether these efforts pay any long-term economic dividends, since most of the jobs generated are short-term in nature. Being a movie extra, or catering on-the-set lunches, may put a few extra dollars in the pockets of locals. Having a movie star parachute into "fly-over country" injects a little excitement into the hinterland humdrum. But this isn't anything to build an economy on. And I'm skeptical about the jobs-generating potential of film-set tourism, since I've yet to plan a vacation based on the backdrop of some film I saw.
It's too early to tell whether Public Enemies will kill at the box office. But Mann already pulled off a respectable robbery of sorts, thanks to Wisconsin taxpayers who helped subsidize the film.
After questions were raised about whether the state can afford to be so generous, and whether the program generates a return on investment, Wisconsin Gov. Jim Doyle wisely took a stand against the practice, vetoing a legislatively-approved cap on the giveaways. That's led to some whining among those who imagine that Wisconsin will reinvent itself as movie star Mecca. But it was the fiscally-correct thing to do.
Mann recently called cutting the subsidies "short-sighted," pointing out that he filmed more days than he intended to in the state thanks to the $4.6 million in tax credits he received. He would have filmed there even without the payouts, he conceded, but they prolonged his stay. And this can't all be reduced to some crass cost-benefit analysis, protested Mann. "The point is not just the dollars and cents we spend," he said. "It's what happens when the state is displayed that way to the world."
But wait. This is a gangster movie, set in the 1930s, in which the arch-outlaw blasts his way through bank jobs (and gets blasted in return by the FBI, eventually). Is that really any way to "display" the state of Wisconsin to the rest of the world? I'm sure kids all across America are just begging their parents to take them to Wisconsin next year, over Spring break, so they can see the actual spot where Johnny Depp, playing John Dillinger, blew someone away.
When Dillinger took other people's money, at least he did it honestly, at gun point. The massive tax heists being pulled off by filmmakers are almost more dishonest, and outrageous, because they act like they're doing us a favor even while they're picking our pockets.
Many states now pay film industry subsidies, which strikes me as the most egregious form of corporate welfare there is (as I've blogged about before). And those states that don't are feeling intense pressure to jump on the bandwagon. Even flat-busted-broke California is getting into the act, launching a new program that will give $500 million in tax breaks to movie-makers over the next 5 years.
But it's debatable whether these efforts pay any long-term economic dividends, since most of the jobs generated are short-term in nature. Being a movie extra, or catering on-the-set lunches, may put a few extra dollars in the pockets of locals. Having a movie star parachute into "fly-over country" injects a little excitement into the hinterland humdrum. But this isn't anything to build an economy on. And I'm skeptical about the jobs-generating potential of film-set tourism, since I've yet to plan a vacation based on the backdrop of some film I saw.
It's too early to tell whether Public Enemies will kill at the box office. But Mann already pulled off a respectable robbery of sorts, thanks to Wisconsin taxpayers who helped subsidize the film.
After questions were raised about whether the state can afford to be so generous, and whether the program generates a return on investment, Wisconsin Gov. Jim Doyle wisely took a stand against the practice, vetoing a legislatively-approved cap on the giveaways. That's led to some whining among those who imagine that Wisconsin will reinvent itself as movie star Mecca. But it was the fiscally-correct thing to do.
Mann recently called cutting the subsidies "short-sighted," pointing out that he filmed more days than he intended to in the state thanks to the $4.6 million in tax credits he received. He would have filmed there even without the payouts, he conceded, but they prolonged his stay. And this can't all be reduced to some crass cost-benefit analysis, protested Mann. "The point is not just the dollars and cents we spend," he said. "It's what happens when the state is displayed that way to the world."
But wait. This is a gangster movie, set in the 1930s, in which the arch-outlaw blasts his way through bank jobs (and gets blasted in return by the FBI, eventually). Is that really any way to "display" the state of Wisconsin to the rest of the world? I'm sure kids all across America are just begging their parents to take them to Wisconsin next year, over Spring break, so they can see the actual spot where Johnny Depp, playing John Dillinger, blew someone away.
When Dillinger took other people's money, at least he did it honestly, at gun point. The massive tax heists being pulled off by filmmakers are almost more dishonest, and outrageous, because they act like they're doing us a favor even while they're picking our pockets.
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