Evaluating film tax credits

North Carolina’s program to provide financial assistance to film makers in the state has sparked some controversy. There’s a debate about how much it really helps the state economy in creating income and jobs. Give us the views of the competing sides. N.C. State University economist Mike Walden responds.

“And we did have this debate in the last session of the General Assembly. I think we’ll probably have it next year too. And there are two sides here.

“One side says, ‘Look, let’s look at how much money is now being spent in North Carolina by people in the film industry making movies, making T.V. series.’ And so these folks will cite numbers of money coming in to make these films, make these series, numbers of people employed, salaries and jobs and argue, ‘Hey, those are big sums of money.’ And the implication is that if the film credit went away, we wouldn’t have that money.

“The other competing view says, ‘Now wait a minute, what you really need to think about is not looking at how much in total is spent on film making, but how much additional spending is due only to those tax credits.’

“And that’s a subtler point. It‘s actually one that’s a little harder to calculate. Those who have tried to calculate it have said, ‘Look, when we do that, it’s not that much.’ There’s going to be film making here regardless of whether there are credits or not, and the credits add only a little bit. This really comes down to a big debate on incentives, not just for films but for other things.

“How do you judge the effectiveness of the incentives? Do you look at the businesses, the size of business that’s using the incentives, or do you try to calculate would that business have come here anyway, even without the incentive?”