Supreme Court Justice Louis Brandeis famously characterized the states as “laboratories of democracy,” in which policy makers are free to try “novel social and economic experiments without risk to the rest of the country.” When those experiments succeed, they provide a model for other states to emulate. Even when they fail, other states can benefit from the lessons learned.
One such experiment — lucrative tax credits for the film industry — has been tried out in many state laboratories over the past decade and a half. As many as 44 states have offered the subsidies, among them Massachusetts, which is currently spending $80 million yearly in givebacks to Hollywood producers. The tax credits have their ardent defenders; what corporate-welfare program doesn’t? But the results haven’t lived up to the hype. Almost nowhere have the lavish subsidies led to a robust, homegrown movie industry, or sparked the level of economic growth and job-creation that would justify so much sacrificed revenue.
This page applauded Governor Charlie Baker’s proposal to end the tax subsidies. The Legislature’s refusal to do so amounts to nothing less than throwing tens of millions of dollars’ worth of good money after bad. According to the Massachusetts Budget and Policy Center, the film program has generated only 430 net jobs each year for Massachusetts residents. Those jobs paid an average salary of $70,000, yet each one cost the state more than $119,000. Similarly, the subsidies have returned only about 14 cents in new revenue to the Commonwealth for every taxpayer dollar forgone.
But while lawmakers in this state haven’t been willing turn off the spigot, those in other states have.
In Michigan, for example, Governor Rick Snyder just signed a bill putting an end to the state’s film tax-credit program. Since 2008 Michigan had spent more than $450 million, yet the state has fewer jobs in the movie industry today than when the subsidy began. Alaska has unplugged its film subsidies as well; Governor Bill Walker signed legislation repealing the program last month. Arizona, Indiana, North Carolina, and Wisconsin have also recently gotten out of the business of doling out money to Hollywood moviemakers.
Brandeis’s “labs” have experimented, and the results have been consistent: Film-industry incentives make for bad tax policy. Other states are calling “Cut!” on their handouts to producers. Massachusetts should too.