Georgia’s movie tax credit helped bring blockbuster productions like ‘Stranger Things’, ‘Ozark’ and ‘Spiderman: No Way Home’ to the state, along with an estimated $4.4 billion in the 12 months ending June 30.
But a new report from Georgia’s Department of Audits and Accounts reveals lingering concerns about the program’s transparency and rising costs to the state treasury.
The program, adopted in 2005, offers a tax credit of up to 30% to production companies that spend at least $500,000 on eligible productions. The annual credit amount more than doubled between 2013 and 2019, from $407 million to $961 million. Georgia’s Ministry of Economic Development estimates that appropriation amounts for 2021 and 2022 exceeded $1 billion, making Georgia’s incentive the largest of any state.
No cap
But unlike most states that offer movie tax incentives, Georgia does not cap the amount of credit given. New York and California, the states with the next largest incentive amounts, cap theirs at $420 million per year. The state auditor’s office recommended that Georgia cap its credit to reduce financial risk to the state.
In March, Rome Republican and Senate Finance Chairman Sen. Chuck Hufstetler attempted to do just that, proposing a $900 million cap on appropriations, but his colleagues ultimately rejected the proposal.
“It’s only growing, and I could get into the things that we pay for, private jets, chefs and personal trainers and things that probably need to be cleaned up,” Hufstetler said in a meeting. of the committee.
But the program has received broad support from lawmakers in both parties. Atlanta Democratic Sen. Nan Orrock told the committee that toying with it would be unwise.
“I just feel very cautious about our removal of this tax credit that has made us the third highest state in the nation for movie business,” she said. “So it’s hard to have a comfort level with that added in. It just feels reckless to me.”
Movies are big business in Georgia — the state said it hosted 32 feature films, 36 independent films, 269 television and episodic productions, 42 commercials and 33 music videos between July 1, 2021 and June 30, 2022.
Proponents of the tax credit compare the $4.4 billion spent in 2022 to a combined $1.4 billion from 1973 to 2008. They point out that Georgia has gone from 45,000 square feet of performing space in 2010 to over 3 million square feet in 2022, with over 4 million square feet planned for the next two years, much of it supported by local investment.
The pro-credit side says filmmaking brings additional jobs not directly represented by the studios, such as carpenters, caterers, electricians and local engineers.
But importing movie magic comes at a cost — on average more than $300 per household — and the movie industry’s halo effect is often overstated, said economist JC Bradbury of Kennesaw State University.
“I don’t doubt that will happen, but what’s not easy to see is that these people wouldn’t otherwise be out of work if it weren’t for the film industry,” he said. declared. “We don’t subsidize a lot of other industries that would create other (jobs). We don’t have high unemployment in Georgia. Local Georgians who are employed in the film industry would otherwise be employed in other occupations in Georgia, and we would be fine. Much research has been done on the economic stimulus effects of film industry subsidies, and no study has found a stimulus.
fake news
The state auditor’s office found that Georgia did a better job of realistically portraying the economic impact of the movie tax credit on the state economy after significantly overestimating the benefit for decades. years, but reports from the Department of Economic Development on jobs in film production “are always misleading at times.”
For example, listeners found that Economic Development touted that productions shot in Georgia brought in $9.2 billion in total salaries, but it didn’t reveal that number included distribution jobs, including movie theater workers.
Auditors said state officials claimed “tens of thousands” of Georgians were employed in film production, while federal data showed about 10,700 jobs in Georgia in film production.
A spokesperson for Georgia’s Ministry of Economic Development did not respond to a request for comment on the story, but in a written response to the audit, the ministry said it “stands by its reporting on direct expenses and employment figures related to the film industry in Georgia, as this information comes directly from its expense form collected from all applicants, as well as other reliable sources.
out of state
Auditors found another mixed bag in the amount of credit benefits going to residents of other states.
In 2016, 88% of the credit went to companies with no permanent establishment in Georgia, and 53% of the salaries used for the credit were paid to non-Georgians. Most other states with a movie incentive require or encourage the hiring of residents.
“We cover 30% of the cost of most ongoing economic activities and the transfer of resources to people who don’t even live in the state of Georgia and who make extremely high salaries from it, a lot of Hollywood talent comes here said Bradbury. “And just paying them to do work that they would otherwise have done in Hollywood in the state of Georgia is really sending that money out of state. This does not enrich Georgia.
The legislature hasn’t made any changes to incentivize hiring Georgia residents, but a bill requiring credit recipients to disclose more of their transactions would reduce credits earned for out-of-state expenses, officials found. listeners. A separate report released in July found that the state’s Department of Economic Development fully or partially responded to all findings related to credit administration.
