Hollywood is making a big production about how tax subsidies are just a shell game. North Carolina has a part in this epic – does that make you feel better that you and other Tar Heel taxpayers are forking over about $45 million a year to huge entertainment conglomerates?
A recent Bloomberg news story focuses on how California, of all places, is losing movie productions to states and countries offering special deals subsidies to lure movie production work.
State and local governments dole up to $1.5 billion annually in subsidies to film and TV, the Bloomberg story says, quoting to Joe Henchman, of the Washington-based Tax Foundation. That kind of loot has lured enough movie business to other areas that California is starting to feel the pinch.
But this situation is a dead giveaway to one problem with the subsidies: They don’t create new enterprises but merely rent them for a short while. The movie companies pack up and leave when production is done. Nor is there any guarantee they’ll come back: The film companies will go on to whomever offers the best deal. “There’s no loyalty from this industry,” Henchman told the news service. “They’re in whatever state is cutting them the largest checks.”
In North Carolina, the subsidies are growing like kudzu. The state ladled out $30 million in tax rebates in 2011, compared to $2.5 million in 2010. It has been estimated that in 2012 movie companies will rake in $45 million, according to a report from its legislative services office.
NC state Rep. Paul Luebke, (D-Durham), is a co-sponsor of H.B. 994, Make Film Credit Nonrefundable. It proposed that the tax rebates be restricted to actual taxes paid in the state. “Disney and others receive millions of dollars from the state,” Luebke told the news service. “It is an extremely expensive subsidy.”
In exchange for these millions, North Carolina gets a few temp jobs, and a few companies pull in some business for a few days or weeks. But, as the most insightful economists remind us, we have to keep in mind the factors we can’t see.
The tax breaks lessen the burden on Hollywood conglomerates that rake in billions, but that means North Carolina businesses must take up the slack. That siphons away money that could be used to hire North Carolinians for permanent jobs, and to grow the businesses.
There’s one silver lining: the giveaways to the movie industry are an implied confession that cutting or eliminating corporate taxes encourages businesses to grow, to buy and hire. So why can’t they be cut for every business in North Carolina?