Not only are film tax credits expensive, they do a poor job of promoting economic development. Tax credits have increased filming in Georgia, which is not surprising: if the state subsidized 30 percent of the cost of manufacturing toilets, Georgia would be the toilet capital of the world. The question is if there are better uses for $860 million, such as education, healthcare, infrastructure, or returning the funds to taxpayers. The answer is a resounding YES. Many researchers have studied the economic impact of film incentives and found little evidence of positive returns to this development strategy. For example, a recent study in the Journal of Economic Geography reported that the return on investment to Georgia’s film tax credits was 30 cents on the dollar — a negative return on investment — similar to other states that offer film incentives.
The failure of film tax credits to promote economic growth shouldn’t be surprising. Unlike most development incentives, which encourage new businesses to relocate to Georgia and employ local labor, film tax credits attract temporary visits from mostly California-based workers who spend much of their earnings outside Georgia. A recent analysis by the Department of Audits and Accounts found that 88 percent of film tax credits went to non-Georgia companies, and 53 percent of all labor income in the film industry went to nonresident workers. While select local businesses and workers may benefit from the subsidies, a majority of the Georgia taxpayers’ funds flow out of state; thus, spillovers onto the entire economy are limited.