Film Production -- The Strangely Favored Industry

My son and I were watching a TV show and at the end there was a blurb about it being made in Georgia.  I said to him "I guarantee that "filmed in Georgia" translates to "subsidized by Georgia."  He did not believe me, and could not understand why anyone would subsidize film production.  After all, we can argue about whether any government subsidized jobs make sense or just cannibalize investment in other areas, but film jobs are the most temporary and fleeting of all jobs.

Turns out I was right (I followed a web link from the credits):

Georgia production incentives provide up to 30% of your Georgia production expenditures in transferable tax credits.

The program is available for qualifying projects, including feature films, television series, commercials, music videos, animation and game development. With one of the industry’s most competitive production incentive programs, the Georgia Film, Music & Digital Entertainment Office can help you dramatically cut production costs without sacrificing quality.

Highlights from the Georgia Entertainment Industry Investment Act include the following:

  • 20% across the board, transferable flat tax credit with a minimum of $500,000 spent on qualified production and post production expenditures within Georgia
  • Additional 10% tax credit if a production company includes an imbedded Georgia promotional logo in the qualified feature film, TV series, music video or video game project
  • Provides same tax credits to all instate and out-of-state labor working in Georgia, plus standard fringes qualify
  • No limits or caps on Georgia spend; no sunset clause
  • For commercials and music videos, a production company may group multiple projects together to meet the $500,000 minimum spend on qualified expenditures

This is just insane.  WTF is the state doing subsidizing 30% of the cost of making commercials?  What could possibly justify this, except that this is a sexy business and it gives politicians a chance to rub shoulders with film people?   Why are Georgia business people taxed in order to hand money film producers?   What makes film production a "good" industry and, say, campgrounds a bad one?

Well, I suppose it could be argued that filming in Georgia would help advertise Georgia by showing scenes filmed on location in the state.  Except that the show we were watching was Archer, an animated series about spies based in New York City.  Not one second of the TV show has ever shown or ever will show a live image of Georgia, and I am almost all the way through the second season and not one location in the state of Georgia has been mentioned  (though they might have mentioned the one in Asia).

 

  • randian

    I was sure you were going to reference _The Walking Dead_ as the show in question.

  • epobirs

    It's just another scam by Mallory Archer to avoid I.S.I.S. paying its own bills.

    A major portion of the Adult Swim shows have taken advantage of this as well, despite having the same questionable qualifications. I suppose Squidbillies could take place in Georgia but it seems a bit deeper into the interior of the continent.

  • Kevin

    We have the same BS here in Michigan. I've never understood why we chose the 'Film Industry,' except that it probably seemed so different than the auto industry (I'm pretty sure these were put in place when the auto industry really started to struggle in the mid/late-2000's). All I can (cynically?) keep thinking is how the favored industries these days seems to be Green Energy and Hollywood ... and together they can make great films like GasLand!

  • JW

    Be careful Warren, you're getting close to the DANGER ZONE.

  • pegr

    The motion picture industry, much like the recording industry, has traditionally been a thinly veiled criminal enterprise. I blame Edison.

  • slocum

    The 40% film tax credit was one of Granholm's genius ideas (along with Richard Florida's 'cool cities' -- aargh). Synder has been trying to cut and eliminate them but with only mixed success:

    http://www.freep.com/article/20130424/ENT01/304240129/michigan-film-incentives-budget

    "Well, I suppose it could be argued that filming in Georgia would help advertise Georgia by showing scenes filmed on location in the state."

    This justification always struck me as pretty funny. Ann Arbor MI 'enjoyed' a mini film boomlet with multiple productions over several years. Most of the films were set somewhere else (where only locals knew or cared that filming was done in Ann Arbor). And in the rare instances when the film actually was set in Ann Arbor? Even worse. In 'Five Year Engagement' Ann Arbor was portrayed as a sort of podunk purgatory for a chef who had no place to practice his craft (and where, apparently, there is snow on the ground at least half of the year). A 'Pure Michigan' commercial it definitely was not. I wouldn't be surprised if any of the Georgia film productions are ever set there, you'll see an appearance by the KKK and/or the banjo player from Deliverance.

  • Michael Stack

    Boy this is timely. I work in downtown Cleveland, where they are shooting the new Captain America. In 2011 they shot The Avengers in downtown Cleveland. They have closed so many streets that it has added at least 4 hours to my commute the last 7 working days, and they're preparing to close a main road for two weeks that will probably cost me personally at least an additional 20 hours of my life. I'm sure Cleveland is doing something similar to Georgia.

  • PamP

    Sploosh!

  • Hideous

    A tiny extra subtlety which I appreciate... When it says "30% of your Georgia production expenditures in transferable tax credits..." that means, approximately that "25% of your Georgia production expenditures will be subsidized in cash," because "transferable tax credits" are those which someone else may use. You may sell such credits immediately for cash at a small discount without any need to pay any taxes to Georgia yourself or even file a return. I wouldn't be surprised to learn that multiple Georgia politicians act as brokers for the resale of "transferable tax credits" (and that is probably why the credits aren't simply "refundable..." wouldn't want to deprive such brokers of their commissions!).

  • Joe Bloe

    The game company I used to work at in Georgia profited heavily from this tax program. I remember thinking that it wasn't a great idea for such a program to exist, but since it did, our president worked hard to collect every tax credit and taxpayer-guaranteed loan that was available. He was pretty darn vicious about it too, playing one municipality against another when the company was planning to move offices.

  • writenow

    Terrific post. Charlie Faniels was right.. The Devil did go down to Georgia. And he was armed with a production crew and an LLC.

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    I guess that Georgia politicians believe in the standard and false Keynesian economic analysis. That is, the increased spending by film companies is so valuable to Georgia's ecnomy that it is worth paying 30% of that amount back to the film company to attract the spending.

    This is a fantasy created from double-counting various flows of money, starting with the increased income in hotels and restaurants. Then, counting the increased purchases of materials by the hotels and restaurants, and the higher salary volume of the employees, and then their purchases. All of this adds in the Keynesian fashion to "money flow" and "economic impact". Many sources think that the "economic impact" of such new spending (say by film companies) is four times the amount spent. They say "economic impact", but they think "economic value".

    If this were true, then $100K of new spending by film companies would be worth $400K in new wealth, obviously worth a rebate of $30K to the film company. Unfortunately, it isn't true.

    If there were a wealth multiplier on spending, even the supposedly mild 1.5 multiplier claimed by Team Obama, then we could Counterfeit Our Way to Wealth.

    Econ 201: The Myth of the Economic Multiplier
    Government spending spending doesn't multiply anything. It takes resources from taxpayers and applies them to government projects. You get a bridge or some paperwork, that is it.

  • obloodyhell

    }}} and/or the banjo player from Deliverance.

    No, that's for next-door Tennessee. For Georgia you'll see black people working on cotton, or beating each other.

  • irandom419

    The film industry has got to be one of the worst industries to subsidize. They don't work 9-5, it is more like 20 hours a day during the couple months of shooting. Then when it is over, that could be the last time they ever work. Do they subtract the unemployment benefits in the net effect? Anyway, I like the comments about the gaming or animation industry using the credits, at least those jobs will last a bit longer.

  • The Epicure

    The reality is that politicians of all stripes do this because of the "glamour" of having the entertainment industry. In exchange for the 30% kickback they get the taxpayers to fund, they get to rub shoulders with actors, actresses, directors and assorted other narcissists.