Starting in July, video-game and music-video producers will pay lower taxes if they move to Georgia after Gov. Nathan Deal (R) signed a law expanding the state’s film tax-credit program to include other forms of media.
The new law, titled the Georgia Entertainment Industry Investment Act, gives a 20 percent income tax cut to entertainment companies doing film or post-production work in the state, expanding the film tax-credit program to include video-game production companies and music-video producers.
Between 2009 and 2014, Georgia’s film tax credit provided about $925 million in economic incentives to television and movie producers, who combined employed about 4,200 people in 2014.
Crouching Credit, Hidden Cronyism
Jeremy Horpedahl, an assistant professor of economics at the University of Central Arkansas, says film tax-credit programs benefit movie producers but not the states that impose them.
“Research on a wide variety of tax incentives shows that they rarely benefit the state as a whole,” Horpedahl said. “Tax incentives often benefit the companies receiving them, sometimes benefit the local community, but always at a cost to the entire state. It’s a hidden form of redistribution, disguised as economic development.”
Horpedahl says the expanded tax-incentive program is just another brick in the corporate welfare wall.
“To be honest, the impacts of this reform will likely be small, in both the positive and negative,” Horpedahl said. “It’s just one more tax break in a mountain of tax breaks that Georgia, like all states, has been building up over the years. What Georgia really needs is to be eliminating these kinds of favoritism, with the overall goal of making the state’s tax system less burdensome.”
Calls for Wider, Lower Taxes
Kelly McCutchen, president of the Georgia Public Policy Foundation, says making taxes as wide and shallow as possible is the best way to promote prosperity.
“Economists of almost all political persuasions agree that broadening the tax base and lowering tax rates is the best, most efficient tax policy to maximize economic growth,” McCutchen said. “Unfortunately, politicians of almost all political persuasions tend to prefer to cater to special interests.”
The best kind of tax reform is the kind that benefits everyone, McCutchen says.
“The best tax reform is applied broadly, not by carving out companies, industries, or other groups for incentives and special treatment,” McCutchen said. “That’s easy to say and much harder to implement—even arguments for unwise policy can be persuasive. That doesn’t make them right, but it does make them hard to resist. It’s the reason legislators need a reference point to keep them steady, and it’s a compelling reason for legislators to heed the forgotten man.”
