Roll Up the Red Carpet: New Study Finds Billions of Dollars in State Entertainment Industry Tax Incentives Don’t Bring Promised Jobs

USC Price Study Evaluated Five States with Highest Incentive Spending—NY, GA, LA, MA and CT; No Significant Employment Boost from Movie and Television Production Found

You may not have seen the latest movie blockbuster, but you very well may have helped pay for it.  A new University of Southern California (USC) Sol Price School of Public Policy study published in the State and Local Government Review finds that corporate tax incentives paid by states to the entertainment industry are not generating the jobs and economic growth as intended.

Cumulative and Projected Motion Picture Incentive Program Tax Expenditures among High-Expenditure States

State	Year Enacted	Cumulative	Projected 20-yr. Exp.
New York	2004	$4.65 billion	$8.74 billion
Louisiana	2002	$2.29 billion	$3.36 billion
Georgia	2005	$1.54 billion	$4.58 billion
Connecticut	2006	$1 billion	$1.65 billion
Massachusetts	2005	$500 million	$1.05 billion

Notes: Cumulative expenditures are reported through 2017 and in constant 2017 dollars, adjusted using the Consumer Price Index.

The new study—Do State Corporate Tax Incentives Create Jobs? Quasi-Experimental Evidence from the Entertainment Industry—analyzed the employment impact of motion picture incentive (MPI) programs, a combination of corporate tax incentives and other services, for the five states that currently spend the most on MPI incentives. The states include New York, Georgia, Louisiana, Massachusetts and Connecticut, which currently account for about 77 percent of all MPI expenditures. More than 30 states currently provide MPIs to the tune of $1.7 billion annually to encourage film and television production in their respective states.

Using an interrupted time series analysis (ITSA), the peer-reviewed study found no significant contribution to job growth as a result of MPIs in the five most highly incentivized states. The study also found that U.S. employment was similarly unaffected by competing foreign MPI programs, particularly those from Canada and the United Kingdom.

The study builds on findings from a USC Price 2016 study that looked more broadly at MPI-generated jobs averaged across all 50 states. The new study focuses specifically on the states with the largest MPI programs, providing tailored quantitative results for each high-spending state, using the most current federal government jobs data and calculating impact over a longer time period than previous research.    

“This new study should put to rest any notion that motion picture tax incentives may work in some states but not others,” said the study’s lead author Michael Thom, an associate professor at the USC Sol Price School of Public Policy who specializes in public finance. “The states investing the most in incentives are not getting the return on investment taxpayers deserve, pure and simple. These incentives cost taxpayers billions of dollars, at a time when that money could be directed to other much needed public services.”

“Even in instances where the study finds an uptick in employment, the jobs created come at a very high cost,” added Thom. “States are essentially paying billions of dollars to create a relatively small number of jobs, which isn’t a prudent use of taxpayer money.”

For more than a century, state and local policymakers have sought to encourage economic development by offering incentives that target a variety of industries. Recent examples include the state of Nevada’s offer of $1.3 billion in tax and other incentives to lure Tesla’s new lithium battery and electric vehicle subassembly factory, to the recent Amazon HQ2 project that racked up government incentive packages worth as much as $8.5 billion. Sixty-eight percent of state and local governments offered tax incentive packages to industries in 1999; by 2009, that total grew to 95 percent.

About University of Southern California (USC) Sol Price School of Public Policy

Since 1929, the USC Sol Price School of Public Policy has forged solutions and advanced knowledge, meeting each generation of challenges with purpose, principle and a pioneering spirit. Our mission is to improve the quality of life for people and their communities, here and abroad. We fulfill this mission through scholarship conducted by our renowned faculty and 11 research centers. The strength of the USC Price research enterprise lies in the multiplicity of interconnected disciplines and diverse passions, catalyzing new ideas to solve contemporary problems.

Related faculty

• 

  Michael Thom

  Associate Professor (Teaching)