The Film Works campaign just posted a fantastic, easy to digest, article that destroys the economic thinking employed by film incentive supporters around the nation. They use a PSA made for New Mexico as an example and then deconstruct it. To be sure, the article was not singling out New Mexico as a target. The PSA just happened to be made for that state, but it could have come from any other lead incentive state (Louisiana, Georgia etc.).
The video they targeted is the following:
The Film Works article found three major problems with the deceptive ad:
- Problem 1: The video ignores the cost of the program to state taxpayers. When filmmakers go to New Mexico and spend $1, the state reimburses them 25 cents in the form of a tax credit. That means each dollar a filmmaker spends in NM actually costs state taxpayers 25 cents. The video is correct in that each $1 in salary that is paid to an actor only costs the producer 75 cents because the state covers the difference, but the entity that pays to create the benefit (state government) and the entities that receive the benefit (participants in the state’s private economy) are different groups.
- Problem 2: Revenue for the economy doesn’t equal revenue for the state. This is probably the most common logic error supporters make when defending state incentive programs. The video from New Mexico gives a false impression that the state’s incentive generates money for the state. According to the father in the video, New Mexico gets 7 cents in tax revenue from each dollar spent on production. But then he tells us it gets better, combining the 75 cents filmmakers spent in the state with the additional 7 cents in taxes they paid, for a return of 82 cents in all. The truth is that New Mexico’s state coffers lose money offering incentives, because the yield in the form of new tax revenues is less in total than the payouts made from existing tax revenues. Instead of an 82 cent gain per dollar spent, New Mexico state coffers actually take a hit of 18 cents for every dollar producers choose to spend in state. This is real money not available for education and other vital state programs.
- Problem 3: Everyone pays, but not everybody benefits. The video gives the impression that all of the New Mexico taxpayers who help pay film producers 25 cents on the dollar benefit from having production in state. This isn’t true in a state with such a small entertainment sector. What the father in the video probably should have told his son is that just the roughly 3,000 people employed in film production in New Mexico benefit from production spending. But some make the argument that those people participate in the wider New Mexico economy, creating more jobs through their own spending. We don’t dispute this. But even if you include all of the indirect jobs that benefit by the program, the number of New Mexicans who get a share of that dollar is only around 10,000. That number equates to about one-half of 1 percent of New Mexico’s entire population. So “New Mexico” doesn’t really get to keep 75 cents or 82 cents. In fact, the State of New Mexico (the taxpayers) actually lose money. The state government gets to cough up 18 cents, and most everyone gives up a little in government services so that 0.5 percent of their fellow state residents can collect a tiny sliver of each film production dollar.
To read the rest of the article, CLICK HERE. This is a nice dovetail to a recent post on this site about film incentives that drew from a comment exchange on another Film Works article.
In all fairness to the New Mexico film industry workers who made this PSA, I seriously doubt they were intentionally trying to make a deceptive PSA. Indeed, as I have said before, I think these industry workers honestly believe the incentive is adding to New Mexico’s state revenue rather than draining it. Problem is, film backers are very unwilling to concede they are wrong even when they are challenged with a truth they cannot refute, which is very unfortunate.
That means each dollar a filmmaker spends in NM actually costs state taxpayers 25 cents. best corporate film production
Yup. Although they recoup a few cents back, its still a net loss to the treasury. Program does create jobs, however.