Georgia: Hollywood of the South?

Moderated by Rick Badie

A popular film industry tax credit has led some to call Georgia the Hollywood of the South. The director of the state film office calls the tax incentive a necessity in a competitive market. A tax analyst suggests it’s time for all states to roll up the red carpet and end subsidies for such a profitable industry.

Tax incentives fuel filmmakers’ interest

By Lee Thomas

Last week, the Georgia Department of Economic Development released the state film office’s fiscal year 2012 economic impact numbers for the film industry — $3.1 billion. The state is currently hosting 32 film and television shows, from home improvement shows to scripted dramas and major feature films.

In February 2007, we had one project filming here: the MTV reality show, “Yo Momma.” The economic impact for that fiscal year was $244 million. How did the state’s film and television industry grow over 1,100 percent in five years? First, by having a proactive legislature and governor who supported the Georgia Entertainment Industry Investment Act, a tax credit incentive of up to 30 percent for projects.

Canada started offering incentives for entertainment projects in the late 1990s. Louisiana started the first competitive domestic incentives in 2002. We lost business to both of them. In 2005, when a biopic of Georgia’s native son, Ray Charles, was filmed in Louisiana, legislators decided enough was enough.

Today, a market must offer incentives. Studios’ accounting departments dictate which states can be considered for projects. The tax incentive savings are typically rolled back into the budget, raising the spending level. The influx of cash into the economy is widespread. Georgia’s real estate market has been buoyed by shows that rent warehouses, offices, homes and apartments. The film business supports hotels, restaurants, rental car facilities and so on. More than 60 new businesses have expanded or located in Georgia since 2007, from major sound stages to production support companies.

These companies are here because the level of business warrants it. They do not get the film tax credits. The film and television industry has provided tens of thousands of jobs to Georgians, not only in technical positions, but also as caterers, production assistants, painters, hair dressers, etc.

A 2011 study indicated that for every dollar the state spends on tax credits, $1.24 is earned in state and local taxes. This does not take into account the value of having Jennifer Aniston talk about how she loves Clarkesville on “Good Morning America,” or the Georgia logo being on the credit roll of a film like “The Blind Side.” It does not represent tourists who travel to Georgia to see the Mystic Grill in Covington from “Vampire Diaries.”

Senoia, which hosts AMC’s hit “The Walking Dead,” has seen businesses downtown increase from six in 2006 to 47 by 2012, largely due to the film industry.

Georgia is uniquely situated for the film business. We have an experienced workforce and infrastructure to save the production companies money.

We have a temperate climate so productions can film year-round. We have a diverse topography of mountains, beaches, plains, small towns and urban landscapes. We have great restaurants and the ease of access provided by the world’s busiest airport. Georgia does not have the highest incentive, but it is sustainable. All of these assets help make filming in Georgia cheaper, easier and more desirable than in most markets. The film industry in Georgia means business!

Lee Thomas is director of the Georgia Film, Music and Digital Entertainment Office.

Better uses for scarce dollars

By Joseph Henchman

This November, the Georgia State Archives reduces itself to three staffers due to budget cuts, making Georgia the only state without archives open to the public. Other state agencies have been asked to cut themselves 3 percent, the fifth consecutive year of budget and staff reductions.

One program not seeing cuts is the state’s annual $200 million in film tax incentives. In recent years, more than $500 million in Georgians’ taxpayer dollars has been funneled to film and television production. Your tax dollars now pick up as much as 30 percent of qualified production costs of one of America’s most profitable and successful industries.

Georgians see some benefits, it is true. The state has seen more productions. A couple thousand Georgians work in entertainment, producing everything from Tyler Perry’s hit movies to the poorly reviewed “Mean Girls 2.” But research by scholars on the left and right has found that most jobs “created” by movie productions are often temporary with limited upward mobility, the kinds of jobs that end when shooting wraps and the production company leaves.

Film tax credits will never create an independent industry. Hollywood folks are clear that if the tax spigot is ever turned off, they’re gone. This isn’t a case of the state providing a bit of seed funding to a new industry. It’s subsidizing Hollywood productions for a few weeks’ work. Studio lobbyists are eager to ask for money, but promise no loyalty in return.

When Georgia’s tax review commission looked at the credit last year, it recommended elimination. In response, those who benefit from the subsidies argued the credit doesn’t actually lose money since it is refunding tax that wouldn’t have been paid otherwise. I don’t buy that. Georgia had film productions even before the credit, but its credit is actually “transferable.” That means that if a Hollywood company gets a bigger tax refund than it owes, it can sell its unused tax credits to Georgians with big tax bills. That means the state is losing money it would have otherwise collected.

Other states are realizing that there are better uses for scarce state tax dollars than expensive and ineffective film tax incentives. By our count, state subsidies for the film industry nationwide have dropped from their all-time record of $1.5 billion in 2010. Many states are at last evaluating the programs, especially after a major embezzlement scandal in Iowa sent film officials and producers to jail.

Some states, like California and New York, are giving even more tax subsidies. California is now spending $100 million a year in film tax subsidies, and New York spends an astonishing $400 million a year. Topping them means essentially handing out money.

Perhaps a better approach is rolling out the red carpet for everyone, not just the film industry. Instead of high taxes for everyone and low taxes for a few, why not even it out so everyone pays a little less? Small Georgia-grown film productions would benefit, as would loyal Georgia businesses that create jobs year after year. As for Hollywood films, Georgians could make some popcorn and enjoy movies that citizens in other states are subsidizing with their tax dollars.

Joseph Henchman is vice president of legal and state projects for the Tax Foundation.

10 comments Add your comment

bill marinella

October 11th, 2012
1:31 pm

Ok im going to weigh in here- I come and purchase at your store and I get a discount. but you wouldn’t have the money I spent at your store unless you have your sale..its pretty simple , oh and by the way, we purchase tens of thousands of DOLLARS local gasoline every week from local gasoline stations in every production
( times ten productions in Atl adds up to big $$$ spent , and yes a reduction after it is SPENT ), and we spend tens of thousands of dollars on lumber to build the sets and and not to mention housing and meals. Did you know that each production feeds an average of 100 crew per day – TWICE a day.. and we purchase LOCAL and HIRE LOCAL how is it that we are not contributing to growth? We dont pay movie stars their salaries..the bill is not set up that way..if your store doesn’t have customers you have no business, so you have a incentive( a sale , if you will ) if there is no sale you cant shop ! its just like any other business that receives tax credits, or benefits from the sale..now i am certain that there are technicalities in finance that i, the average person wouldn’t see that actually support some of Henchmans points- at the end of the day revenue is generated and taxes are spent..so what if the tax credits are transferable- we are now helping a struggling business who is surviving because they are getting a BREAK on their enormous and probably unjustified tax bill that now is helping this person or business survive ..that means that we , the film industry , just helped not with just our own industry , but helped someone else

[...] Click here for original article. [...]

Holt

October 11th, 2012
1:03 am

Lee Thomas has the facts and is right. As a person that had little income until I started working as an Extra on the many films and TV shows in the Atlanta area, the money that I make helps tremendously with bills and other expenses. Several studios have been built within the past few years which employ thousands in permanent jobs. We have local casting companies growing in personnel, along with many other film provider companies. You can say that each film hires, but they are only temporary jobs, but what you don’t realize is there are multiple film and TV projects happening at the same time, virtually year round. When you finish with one film, you can jump to the next one. If the tax break is eliminated Georgia will lose at least three quarters of the production that is going on here now. Simple math, which is better? 100 productions in Georgia paying 30% less in taxes or 10 productions in Georgia paying 30% more in taxes. The film and TV industry is not only raising State revenue, it is spending on the local economy and first and foremost, providing jobs to those of us who need it and a paycheck, which by the way, also adds revenue to the State’s coffers. Any changes to the tax rates will generate less revenue to the state without a doubt.

LONGTALLSALLY

October 10th, 2012
11:50 pm

If it weren’t for film productions my family would be in a dire financial situation. I was out of work for two years and it wasn’t until I started working with film and television that I could bring in a paycheck. I was overqualified for most retail jobs and interviews usually resulted in a passive aggressive manager asking why someone who negotiated million dollar sales would want to sell bath gel. No one would hire me. I know of several former colleagues that were able to work as extras and were actually booked often because of their professional wardrobe and life experience. Some of those colleagues with more technical skills were able to network and then segue from extra work into positions on the crews. I’ve met many people in the same situation. There are enough productions going on where you can find short term work for small paychecks and still have time to continue to job search.

Ric Reitz

October 10th, 2012
7:46 pm

The 2010 Georgia Special Tax Committee recommended against all tax incentives, not just the entertainment industry. In less than six months the committee attempted to review over 140 incentives, including the 2008 Entertainment Incentive, plus the entire state tax code. I can assure readers here that the work of that committee was incomplete at best, which is no slight to its members, whom I respect, just reality. Further, to compare Georgia’s Entertainment Incentive with other states is to ignore its unique differences. Apples to oranges. Do your homework. There have been no scandals here, and we are not in a race to the bottom. The industry does in fact break even with its program when considering all aspects of its incumbent value: taxes collected vis-a-vis expanded economy, in-kind promotion, added non-incentivized industry, collateral investment, tourism and trade. This is true economic development. To suggest that the state annually loses over $200M is not only patently false, it shows a lack of research and understanding. Further, to categorize a vibrant, skilled, freelance work force as being insignificant is a slap in the face to anyone who needs multiple clients to survive, including doctors, lawyers, restauranteurs, virtually anyone who owns or operates a business. Georgia cast and crew members for film, television, music, commercials, and more, are some of the top in the nation, and they are relevant to our state’s economic future. Finally, there is no crime in soliciting business from a competitive industry that is actually profitable, as I have found that businesses without money tend not to invest at all.

Bi-Courious George

October 10th, 2012
1:37 pm

Is MIDTOWN considered the “San Francisco” of The South or the “West Hollywood” of The South?

DesMonte

October 10th, 2012
12:46 pm

How can anyone knock the film tax credit, without it the world would never have gotten to know Honey Boo Boo and her eating disordered family.

Speed Racer

October 10th, 2012
12:32 pm

Lowering taxes is not subsidizing. Leave the lower taxes for the film industry, and lower the taxes for every other industry. Lower taxes = more revenue. It’s been shown to work many, many times. Why not make Georgia the place EVERY business wants to come because we have the lowest taxes?

MANGLER

October 10th, 2012
11:59 am

Is Mr. Henchman (awesome movie last name BTW) against all forms of tax rule flexing to bring businesses in? Bio and tech firms get breaks to move here. Large companies get a break so they build a headquarters here. Car plants get an almost free ride so they set up shop.
Do the larger companies need the subsidy? No, not really. But if that’s what it takes to get them here, and if the end result is more income over time (this story mentions an immediate 24% return on investment) then why not? Yes, a home grown company would love to pay a few hundred less per year in taxes. But becoming a thriving hub in whatever industry has much longer reaching effects than a slightly smaller tax bill.
Charlotte has watched Atlanta for years and is positioning itself to replace us at the Capital of the South in a few years. Alabama of all places is getting manufacturers over us because of such deals.

SAWB

October 10th, 2012
11:20 am

Like many people I have run across the occasional production site, seen the locally produced show or heard a Hollywood Big Shot plug Georgia. Yes, these things do create a little pride, but I wonder at what cost. I fear these tax credits subsidize people who don’t need them and just provide an opportunity for Georgia’s Political and Business Elite to hobnob with the Hollywood Elite while the rest of us see taxes rise and services cut.