Poor Ohioans’ Tax Dollars Fund Rich People’s TV Shows

Poor Ohioans’ Tax Dollars Fund Rich People’s TV Shows

Every independent study of film tax credits has found they do not create lasting economic development nor come anywhere close to paying for themselves.
Jared Meyer and Shane Otten
By

If the existence of the show “Vanilla Ice Goes Amish” is not ridiculous enough, try the idea of giving it government funding. Believe it or not, Ohio taxpayers paid for this show’s production.

Under the recently revised Ohio Motion Picture Tax Credit, annual funding for film productions in the state will double to $40 million. This credit is refundable, meaning Ohio taxpayers actually have to cut checks to production companies that film timeless classics such as “Alpha Dogz Presents: Pups United.” (Buckeyes, you need to watch this trailer to see how your tax dollars are being used.) To be fair, since the state’s film tax credit program was first passed in 2009, blockbuster hits including “The Avengers” and “Captain America: Winter Soldier” have also been filmed in Ohio. But does subsidizing film actually pay off?

Why These Credits Don’t Pay Off

Supporters of film subsidies always point to job creation and increased sales for local businesses when productions come to town. Several studies have tried to estimate the economic benefit of Ohio’s film tax credit. A 2014 study from the University of Cincinnati looked at three major movie productions filmed in the Cincinnati Metropolitan Statistical Area between 2012 to 2014. The study found that granting $6.5 million in film tax credits created 4,028 jobs—for a total economic effect of $45.9 million on the region.

However, these numbers are about as realistic as talking dogs saving the day (have you watched the Pups United trailer yet?). A more recent report from Cleveland State University raises serious questions about the University of Cincinnati study. CSU estimates that the 31 projects that received Ohio film tax credits from 2011 to 2015, a significantly wider timeframe, resulted in only 1,729 new jobs for the state. Including 10 times as many projects, CSU’s estimate of jobs is less than half of the 4,028 jobs the University of Cincinnati reported.

Even the claim that 1,729 full-time equivalent jobs were created has to be taken with a grain of salt. The report does not break down the duration of these jobs. Determining the number of full-time jobs that can be sustained for multiple years is crucial when assessing the success of any program.

There is ample reason to doubt that targeted tax credits—especially those for film—create lasting economic growth. These studies were both prepared for Ohio-area film commissions—obviously biased sources that stand to benefit from favorable results. It is important to note that every independent study of film tax credits has found they do not create lasting economic development nor come anywhere close to paying for themselves.

Few Benefits to Locals, Most to Rich Out-of-Staters

Additionally, work in the film industry is transient and skilled. Instead of recreating Hollywood in Cleveland, Ohio’s film tax credits simply lure out-of-state workers for single projects. If Ohio cannot keep up with other states’ subsidies (California has a $330 million a year film credit budget and New York’s limit is $420 million), filmmakers will simply pick up and move to another state.

Looking at the hard numbers, the CSU report shows Ohio received $6.7 million in state and local taxes out of its initial layout of $32.6 million, a low return of 20 cents on the dollar. While specific regions in the state may benefit for a short period of time, taxpayers and the state budget are the clear losers.

Data from the CSU report shows that 70 percent of the tax credits were spent on only 7 of the 31 total productions listed in the paper. Before the new bill, there was a previous $5 million cap for single projects. However, when “Captain America: Winter Soldier” came to Ohio, the state allowed the film’s producer to file two separate applications to avoid exceeding the cap.

This example demonstrates that Ohio’s film tax credit is simply another case of corporate welfare. With the program’s $300,000 production budget minimum, Ohio shows it has no interest in helping small, local filmmakers. Raising even more questions, the state audit report redacts information about how many Buckeyes were hired.

The idea of having movie stars in your home state is undoubtedly attractive, which is part of the reason so many states have adopted these plans. What governor could resist taking a picture with Scarlett Johansson, who plays Black Widow in “Captain America”?

But star-struck policymakers have created a battle between states to see who can offer the best incentives to attract large productions. If a state does not have a program, legislators and citizens presume their state is “missing out” on economic opportunity and new jobs. But film tax credits do not create many—if any—lasting jobs. They simply transfer jobs across the country, depending on which state offers more money.

Fortunately, since 2009, 10 states have ended their film incentive programs. By dropping the film tax credit, the Ohio legislature could undoubtedly discover better ways to spend taxpayer money—such as improving the nation’s worst water supply. Or Ohio could work to improve its state business tax climate, which the Tax Foundation rates one of the ten worst in the country.

Although saying goodbye to a potential third season of Vanilla Ice trying to be Amish may be a hard pill to swallow, Ohioans need to step away from the blinding Hollywood lights and take a closer look at the actual effect of their wasteful film tax credit.

Jared Meyer is a fellow at the Manhattan Institute for Policy Research. Shane Otten is a contributor to E21. Follow Jared and Shane on Twitter.

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