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making the sausage

Polone: Why Taxpayers Get Screwed When Every State and Canada Fights to Lure Movie Shoots

This week I am to have a meeting with a studio about a plan for producing a movie I have in development. When we start the discussions about where to shoot, the first thing discussed won't be which location has the perfect look or the right caliber of local crew; rather, it will be about which state or province will pay us the most to bring our production to their territory. When I produced Zombieland, there was never a discussion of shooting the movie in California, where most of the action takes place and where one finds the best moviemaking infrastructure and crews. California had no state incentive at that time, so instead we shot the movie in Georgia and received about $4.5 million in tax credits. And as someone who has worked on and benefited from productions that have received funding from the Federal Government of Canada, the provinces of Quebec, Ontario, and Manitoba, the states of Georgia, Louisiana, New York, and California, as well as New York City, I still believe that these subsidies, both in the U.S. and abroad, need to stop. They're bad economics, they don't make a film better (at times I think they actually make them worse, since trying to make one location look like another is never as impressive as just going to the place the movie is set), and they're a misuse of public funds, especially during this seemingly unending recession.

I'm not against them because I'm a filmmaker who wants to shoot in the best-looking location with the exact crew that I want; I'm against them because I’m a taxpayer. For a perfect (but, sadly, not unique) example of why these credits are bad policy, look at Michigan. In 2010, that state's incentive program cost $117 million, and in return it created 1,039 full-time jobs; that breaks down to Michigan paying an enormous $112,608 per job. And even taking into account the tax receipts generated by the productions, the program had a net loss of $60 million. A bipartisan State Senate study of the 2010 Michigan program reported that “film incentives represent lost revenue and do not generate sufficient private sector activity to offset their costs completely." And as soon as Michigan scaled back the program because the cost was unsustainable, film and television production pulled out, and those who had trained in the fledgling Michigan film industry, thinking it would be a dependable trade, were left without work or a similar industry in which to transition. Some relocated to other states, like Ohio, which recently instituted its own incentive scheme. Because unlike infrastructure-heavy businesses that set up in large entrenched plants with heavy machinery, the film business is highly mobile and can quickly jump to any other state that bribes them to do so. I had two films planning to shoot in Michigan, and after they cut the subsidy, we abruptly changed the plan: One film moved to California, the other to Romania. Why Michigan didn’t pour their money into the rebounding auto industry or the preeminent aerospace/defense business that continues to grow despite the recession is beyond my comprehension. How many dormant manufacturing plants and unemployed factory workers are there in that state?

Michigan isn’t unique. Study after study (with the exception of those funded by the biased Motion Picture Association of America) shows that states generate a return of far less in tax collections than they put out in incentives. Louisiana, for example (which has become a major destination for such films as The Curious Case of Benjamin Button and The Expendables), did a study that showed only a 13- to 18-cent return on each dollar spent. Yet the program continues. It is difficult to kill a bad program, given the lobbying by the MPAA on behalf of the studios and by brokers who earn a commission by selling the studios' tax credits to high-income individuals and corporations who in turn use them to reduce their tax liability to the state.

California is probably the only state that truly benefits from an incentive program, but this is a purely defensive maneuver and a matter of survival. The modern entertainment business was founded here and, all things being equal, most producers and directors would prefer to stay here. But things aren’t equal, and California’s film and television industry was being destroyed by all of the other states luring projects away through government funding. Only by initiating a program in 2009 that shells out $200 million per year in subsidies has the runaway production drain been stemmed. With California's huge budget deficit and a top income tax rate of 11 percent, there are any number of ways that $200 million could be better spent. How about putting back some of the $1.4 billion cut from the state university system last year? But until all the other states do away with their film subsidies, California can't afford to do away with theirs.

And then there's Canada, which provides one of the biggest draws for American production. The U.S. Trade Office should file an action against the country, just as they did against the European nations that subsidize Airbus for creating a disadvantage for our airline industry. Really, the circumstances aren’t much different. And the time couldn’t be more right for this type of action, given that there is a movement to limit other kinds of welfare for business, such as the egregious subsidies given to agribusiness and the oil industry, which are costly, unnecessary, and, given the huge profits these industries currently enjoy, provide other countries with an excuse to maintain their own protectionist policies.

I and most of those with whom I work are part of the one percent who are being protested these days. While I find the protesters' messages confusing and misguided, I can certainly sympathize with the overall concept that the system inappropriately favors the rich. We probably need higher tax rates, but we certainly don’t need to be subsidizing large corporations and rich individuals like myself just to create or maintain relatively few jobs in locations that would not be economically viable if not for those subsidies. If government really wants to help the entertainment industry, they’ll spend more on enforcing anti-piracy laws: Stopping the theft of the product we make would provide more economic benefit than all of the state subsidies combined.

Gavin Polone is an agent turned manager turned producer. His production company Pariah has brought you such movies and TV shows as Panic Room, Zombieland, Gilmore Girls, and Curb Your Enthusiasm. Follow him on Twitter @gavinpolone.