Hollywood is poised to rescue Georgia taxpayers from a scandal-plagued multimillion-dollar drain on public finances, according to hard-featured actor Ron Perlman. The “City of Lost Children” star’s #BoycottGeorgia campaign has attracted broad support from around Tinseltown, which benefits from nearly $200 million in state spending on film, television, and digital production.
“There are countless States in this great country that offer incentives to boost employment for their workers,” Perlman tweeted after the defeat of Democrat Stacey Abrams by Republican Brian Kemp in the close race for Georgia governor. “And there are countless States that play by the rules and honor the sanctity of one man/one vote, regardless of skin color. I’ll invest my time in those!!!!!”
The idea for a boycott originated with former New York Times columnist Frank Rich, shortly before Abrams gave up her challenge last week. “If Kemp wins in Georgia, Hollywood should put its money where its mouth is and pull all production out of the state,” Rich tweeted, drawing support from a flock of midlist entertainers.
“Hollywood needs to use it’s [sic] leverage and pull out of Georgia,” said “West Wing” actor Bradley Whitford. “Studios need to put their money where their mouth is and stand up to hate. #boycottgeorgia.”
“Is the entertainment industry willing to support the economy of a totally corrupt state that suppresses democracy; where the winner isn’t the best choice for the people but the best schemer or crook?” asked “Charmed” star and social activist Alyssa Milano.
As momentum gathered for boycotting one of the biggest-spending entertainment states in the union, Abrams took to Twitter to tamp down the enthusiasm: “I appreciate the calls to action, but I ask all of our entertainment industry friends to support #FairFightGA — but please do not #boycottgeorgia. The hard-working Georgians who serve on crews & make a living here are not to blame. I promise: We will fight — and we will win.”
But recent developments in Georgia’s film tax-credit program, including a scandal involving a Clint Eastwood and Tom Hanks hit, indicate Perlman’s boycott, not Abrams’ plea for business, would more greatly benefit the people of Georgia.
Georgia Wins If Hollywood Leaves
The Peach State is among the nation’s largest spenders on motion picture production. Georgia spent just shy of $192 million through its film tax credit in 2015, the only year for which spending numbers are available. Atlanta is home to Tyler Perry studios, and the state’s pursuit of film production goes back to the governorship of Jimmy Carter, who established Georgia’s film commission in 1973.
Tradable film production tax credits boomed in popularity in the last decade, offering a double incentive for state politicians. Because the credits take the form of rebates on taxes not yet paid, they are counted on the revenue side of the state budget, not the expenditure side, masking the cost to taxpayers. The benefit, on the other hand, is a product that is not only visible but created for maximum visibility, providing positive media coverage for state governments that succeed in luring high-profile productions.
Enchanted by the movie dream, state governments fought for the role of America’s third-largest production center. Michigan, Louisiana, Alaska, Iowa, and Maryland all showered California producers with money. The Motor State’s film tax credit program at its peak gave taxpayers the privilege of sponsoring 42 percent of a production’s cost.
Commissioned studies in many states promised economic “multipliers” between $3 and $4 per dollar spent, with some suggesting the cinematic economy could grow so vast as to bring in more taxes than the state was losing on the credits. By 2009, 44 states and the District of Columbia offered film production incentives, with only Delaware, Nebraska, New Hampshire, Nevada, North Dakota, and Vermont as holdouts.
Spending Big to Lose Big
But for every bright light there’s a broken heart. The people of Michigan spent more than $500 million between 2008 and 2013, only to find that the state had fewer film jobs at the end of that period than at the beginning. The state began shutting down its tax credit program in 2012, amid outcry over large payouts to unloved productions like “Oz the Great and Powerful.”
The Michigan experience highlighted another edge to the public-relations benefits state politicians hoped to gain. Entertainment publicity is known to turn toxic overnight, and the combination of government handouts with Hollywood financing creates great incentives for high-profile scandal. Iowa shut down its film program in 2011, following the conviction of the program’s manager on a felony misconduct charge.
Maryland also got a publicity boomerang from its once-popular film tax credit, which brought production of the series “Veep” and “House of Cards” to the Old Line State. The producers of “Veep” took in $22.7 million in production tax credits before leaving the state in 2015, lured back to California by another tax credit, as even the Golden State found itself in the odd position of having to fight for a national share of entertainment production.
“House of Cards” left state pols with an even bigger black eye in 2014, when the show’s head of production sent a threatening letter to then-Gov. Martin O’Malley demanding a bigger production incentive. The move prompted one state senator to retaliate by introducing legislation (not enacted) to seize the show’s assets.
Meanwhile, video surfaced of a closed-press, politician-packed shindig at the Red Red Wine Bar in Annapolis, where leading man Kevin Spacey, bookish in tortoise-shell glasses and an ecru sweater, was ushered in the back door for schmoozing and selfies with besotted Maryland officials.
The meet and greet worked. “House of Cards” hobbled to its end in Maryland, and the state’s tax credit also hobbles on, despite Gov. Larry Hogan’s negative comments about the program in the past.
Must Be Nice to Have Star-Studded Lobbyists
Georgia itself, which has bucked recent downscaling trends by increasing its tax incentive, is embroiled in a scandal over the financing of Clint Eastwood’s “Sully” in 2016. Warner Bros. charged the state $600,000 for airplane equipment that was never used in the state, Variety reported in April. The apparent fraud included trucking a small piece of airplane fuselage, not used in the film, to an Atlanta studio, and routing business conducted wholly in the western states through a Georgia broker, who claimed to have been paid just $1,500 for his services.
The state attorney general’s office did not respond to a request for comment, nor did Warner Bros. vice president of communications Dee Dee Myers. A spokesman for the Georgia Department of Revenue said the state considers all parties who interact with its tax collection processes—even out-of-state recipients of salable tax credits—to be covered by taxpayer confidentiality protocols.
If Georgia officials are tight-lipped about specific sub-swindles within the film tax credit program, they also show little interest in the program’s broad structural costs to taxpayers and damage to state finances. Georgia appears to have published only two reports on its film tax credit program, one in 2005. The only expenditure record is a 2015 income tax credit utilization report published by the Department of Revenue.
For that year, film credits amounted to $191,930,012.78—nearly three times more than the next-largest single item, a low-income housing credit. The state does audit specific tax credit requests, businesses, and individuals, Department of Revenue spokesman William Galston said.
Other States Are Backing Away from These Boondoggles
Other states have backed away from film tax credits following non-partisan evaluations. A 2015 study by Maryland’s Department of Legislative Services recommended terminating the program, noting that several states had eliminated their film tax credits since the 2009 peak. Louisiana, which once led the nation in largesse and competed so gamely with Hollywood that a film called “Battle: Los Angeles” was actually shot in Baton Rouge, has capped its total expenditures.
David Zin, chief economist with Michigan’s Senate Fiscal Agency, forced a reevaluation of that state’s film tax credit with a 2010 study showing that the cost to taxpayers of employment associated with the film tax credit ranged from $186,519 per job to $42,991 per job. In a phone interview, he did not address Georgia’s tax credit program specifically but cast doubt on the “multiplier effects” cited in pro-tax-credit studies.
“Production companies want the money up front, so once they are awarded a credit they sell it [to a party that expects to be liable for taxes in the state],” he said. “Production and distribution are segmented. Production companies rarely have any ‘revenue’ subject to tax in the state they’re filming in. All the money comes after you’ve made the movie and sold it off to a distribution company, which doesn’t have any nexus to the state where the movie was filmed. In any state with a transferable credit, the recipient of the credit immediately sells it off for money. Some banks operate as middlemen. Insurance companies are frequent buyers. And there’s a discount rate applied to the transfer. So if you give a $10 million credit you’re not getting $10 million in production activity.”
This Is Spending Through the Tax Code
Film tax credits need to be thought of as cost centers, said Zin, even if states continue to give them out.
“Most economic development credits, if the rationale for them is correct, either encourage projects that wouldn’t have otherwise happened or make projects that would have happened bigger,” he said. “As such you always end up with a kind of public subsidy. These incentives are not going to pay for themselves. So the question needs to be whether that’s viewed as a worthwhile expense.”
Georgia politicians still seem convinced that the Hollywood dream is worthwhile. Atlanta expanded its credit to include “qualified post-production expenditures” in February, and media coverage of the state’s film industry overwhelmingly avoids talk of scandal or losses to the treasury in favor of soft features on the knockabout gang from “The Walking Dead.”
Amid that hype, Perlman’s call for a boycott is as welcome as a critical pan that breaks up a 100 percent rating on the Tomatometer. It might not play well in the tonier parts of Atlanta or L.A., but it could spare Georgia residents the indignity of having their pockets picked by Hollywood stars who despise them.
