In Brief:
From Marvel blockbusters to "The Walking Dead" series, many big hits have been filmed in Georgia due to the state’s massive production tax credits. Set at 30 percent with no cap on the number of credits that can be bought or sold, Georgia’s tax credit is one of the biggest in the country.
But Georgia was among several states where legislators have been reconsidering their film and TV tax credits. Following a state-funded audit last December that found the state loses money on the billion-dollar program, legislators proposed a bill to place caps on it.
The bill didn't pass. State Rep. Long Tran, a former actor and stunt driver, says it's too early to make big changes, especially with the industry just finding its footing again after COVID-19 destabilized the global film industry. “I’d like to see us hold off on making any changes for five more years,” Tran said before the bill was defeated in the state Senate. “But if we have to make a change, let’s do something that stabilizes the industry and makes people confident that they can come here.”
Still, Georgia is not the only state to consider capping its tax credit program. In 2022, Kentucky limited its film tax incentive program to $75 million annually. That same year, Maryland capped its program at $20 million. Earlier this year, a Connecticut bill to abolish the credit entirely also got blocked by the state Senate.
Conversely, there's still considerable momentum for states to get on board this particular bandwagon. Since 2021, 19 states have added new film tax credits or expanded their existing ones in hopes of taking advantage of the rebounding economy after the pandemic’s peak. In June, Illinois Democratic Gov. J.B. Pritzker signed a package to expand tax credits for movies as well as other industries.
On Wednesday, New Jersey Democratic Gov. Phil Murphy signed a bill to extend film tax credits to more producers of digital content.
New Jersey has partnered with Netflix to develop production support in the state. In May, the New Jersey Economic Development Authority allowed the streaming giant to access additional tax incentives by making them a “studio partner” of the state. This gave Netflix the potential for a whopping 40 percent tax credit on qualifying expenses on projects filmed in the state.
“With Netflix leading the way, the creation of new, world-class studios has solidified New Jersey's standing as a national leader in film and television production,” said Gov. Phil Murphy. “These substantial investments will create thousands of good-paying jobs, support small businesses and vendors, and stimulate the regional economy.”
Other states are considering restarting or updating their film tax credits. In Michigan, which shut down its tax incentive program a decade ago, two bills went through a state House committee. In Kansas, Democratic Gov. Laura Kelly vetoed a legislative attempt to create a film tax credit.
This is a game that not every state can win. An analysis from New York’s Department of Taxation and Finance found that its film tax credits deliver underwhelming returns. For every dollar in tax breaks, the state receives around 15 cents in direct tax revenue. Taking into account jobs for people who don't work on productions but help feed or support them increases that number to 31 cents. “The film production credit is at best a break-even proposition and more likely a net cost to the state," the report concludes.
This is echoed in other states. Louisiana's tax credit "program does not generate enough state tax revenue to make up for the revenue that the state loses," according to Ed Seyler, an economist for the Louisiana Legislative Auditor.
A Georgia audit notes that film tax credits “induces substantial economic activity” in the state, but cost taxpayers nearly $1 billion annually, with a return of investment of only 19 cents per dollar spent.
Although the bill to cap credits failed to pass, this won't be the last attempt to revisit the program, says Carlianne Patrick, who coauthored the audit. “This has been a point of discussion for a number of years,” she says. “I think because this is the biggest tax expenditure on the books, it really will continue to be part of the conversation.”
