New Jersey Gov. Chris Christie (R) and possible presidential candidate garnered headlines today for rescinding a $420,000 economic credit for MTV’s hit reality show “The Jersey Shore” because of the damage he feels it does to the state’s image. What gets lost in the hullabaloo is that government subsidies to Hollywood are so frequently bad investments that fewer states are handing them out.
In recent years, many states and even some cities have set up departments whose job it is to entice Hollywood executives to use their region to shoot motion pictures or television shows because of the jobs these productions attract. The Tax Foundation estimates that states doled out $6 billion in these subsidies over the past decade.
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There is near-unanimous agreement among independent economists that taxpayers are the losers in these arrangements.
“Film tax credits fail to live up to their promises to encourage economic growth overall and to raise tax revenue,” Tax Foundation economist Joseph Henchman recently wrote. “States claim these incentives create jobs, but the jobs created are mostly temporary positions, often transplanted from other states. Furthermore, the competition among states transfers a large portion of potential gains to the movie industry, not to local businesses or state coffers.”
Arizona, Arkansas, Idaho, Kansas and Maine have either ended their programs or decided not to appropriate funds for it. Officials in Iowa shut down that state’s program after widespread abuse was discovered. About 9 states have scaled their back their incentives.
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Indeed, the state of New Jersey is among those who have had second thoughts about giving subsidies to Hollywood. In 2010, Christie suspended New Jersey’s Film and Tax Credit as the state faced a huge budget deficit. As part of the state’s 2011 budget process, $10 million in funding was restored despite the governor’s misgivings. The state’s program enables production companies to claim 20% tax credit on some expenses if at least 60% of their costs were incurred in New Jersey. In a letter to the New Jersey Development Authority, which awarded the credit, Christie said, “I am duty-bound to ensure that taxpayers are not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the state and its citizens.”
Plenty of states are willing to roll out the welcome wagon for Hollywood. For instance, Pennsylvania Gov. Tom Corbett (R), who has aggressively cut state spending, kept his state’s film credit in tact. “The film tax credit, which we are retaining — and never thought to do otherwise — will attract jobs and pump money from outside the state into our economy,” he said.
The same attitude prevails in Virginia, where the Virginia Film Office, which recently helped win subsidies for filmmaker Steven Spielberg, says on its website that “the direct and indirect impact of Virginia’s motion picture and video production industry in 2009 was $346 million, representing 2,700 jobs for the state.”
As for “Jersey Shore,” well, a spokeswoman for MTV told the New York Times that the governor’s decision “wouldn’t affect the show.”