Policy Research

Lights, Camera, but No Action. Tax and Economic Development Lessons from State Motion Picture Incentive Programs

Michael Thom

Summary

The author utilizes economic and labor market variables to measure the impact Motion Picture Incentive (MPI) tax credit programs have on state economies across the country. The author's analysis evaluates structure and duration of the tax credit alongside post-implementation changes in employment, wages, gross state product, and location quotient for the state's motion picture industry. It was found that transferable tax credits produced slightly positive results for industry employment, while refundable credits temporarily improved industry wages. While results indicate some variation in benefits based on the structure of the tax credit, overall outcomes suggest that spending on these programs do not correspond to any long-term economic gains in the motion picture industry.

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Policy Implications

Policy Implications: MPI programs generally do not produce substantial return on investment; however, policymakers can attempt to maximize potential benefits through careful program design and tax credit type. The author recommends thorough and unbiased cost-benefit analyses prior to program implementation, pre-determined and specific targets for hiring and spending, and inclusion of a claw back provision.