Analyze tax incentives
A while back, my wife and I got word that Scarlett Johansson and Ryan Reynolds were taking a break from filming to eat at an Atlanta restaurant near our home. We ran out the door to try and get a better look. It was a thrill.
So I can understand why Georgians love the sights and sounds of Hollywood that have come to our state in the past few years. But lawmakers can’t afford to make decisions with stars in their eyes.
Filmmakers and other companies doing business in Georgia claim hundreds of millions each year in special tax breaks, yet the state does very little to measure what we get in return. Before adding new business tax breaks, such as one for the music industry, lawmakers should ensure taxpayers are getting a good value for those already on the books.
Georgia’s six largest business tax breaks cost the state about $600 million each year. The income tax credit for film producers is perhaps the state’s most popular business tax subsidy. It’s also one of the most expensive.
The program is set to drain about $163 million from the state treasury in the 2015 budget year, a figure likely to grow in coming years. Now, some in the General Assembly are proposing similar credits for music producers.
Some tax breaks are probably good public policy; others are likely ineffective. Knowing which is which requires periodic analysis. A thorough analysis of the film tax credit in Massachusetts, for example, found budget cuts required to pay for the program cost about as many jobs as the credit created.
Georgia’s tax credits might be better designed and more effective than those in other states. But we don’t have a solid way to know that. Lawmakers do very little to determine if tax subsidies work as intended. There is no independent, objective review process to answer questions: How many jobs are the tax breaks creating? Would the money used for tax credits deliver better bang for the buck invested in something else, such as improving transportation or training a quality workforce?
In Oregon, all tax breaks are scheduled to expire every six years, which gives lawmakers and auditors a chance to review them. The North Carolina General Assembly recently partnered with state universities for an in-depth review of tax break programs. The Pew Center on the States helped Rhode Island spearhead an effort to make that state a national model; the state revenue agency now produces reports every three years detailing the benefit and cost of each subsidy, including its impact on the state’s overall budget and economy.
Before Georgia rolls out the tax-break welcome mat for a new category of entertainers, let’s make sure what we have works. That’s the best way to get good value for taxpayers.
Wesley Tharpe is a tax and economic policy analyst with the Georgia Budget and Policy Institute.
