As California moves closer to quadrupling tax incentives for film production, North Carolina is moving in the opposite direction, cutting its program this week by two-thirds. The Tar Heel state joins a growing list of those that have scaled back their incentives programs or eliminated them altogether.
Pushback from Tea Party ideologues who oppose all forms of tax incentives that favor one industry over another is largely responsible for the growing trend. That's especially true in red states whose legislatures or state houses are dominated by fiscal conservatives -- as is the case in North Carolina. “The Tea Party faction played a huge role,” said an entertainment-industry source familiar with the situation in the state. “It’s not just about film incentives; it’s about an anti-government spending philosophy across the board.”
Beginning January 1, North Carolina will replace its 25% refundable tax credit with a $10 million competitive grant program, capped at $5 million per production. Funding for the program will be cut from $60 million a year to $10 million. The MPAA had urged NC legislators to continue funding at current levels, which the trade association says was responsible for more than 12,000 jobs in the state (including more than 3,000 production jobs) and more than $538 million in wages from production and distribution-related jobs. “It’s disappointing that the new grant program included in the budget agreement will prevent North Carolina from remaining competitive in attracting this prominent source of in-state economic activity,” MPAA spokesperson Kate Bedingfield said. Recent films and TV shows shot in the state include The Hunger Games, Iron Man 3, Tammy, Homeland, Under The Dome and Eastbound And Down.
Conservative North Carolina lawmakers weren’t buying it, however, and voted to slash the program. Republican Gov. Pat McCrory called it “a good compromise.”
The conservative Washington, D.C.-based Tax Foundation, which has been one of the leading voices against film tax incentives, might have been speaking for all Tea Partiers when it said that “Based on fanciful estimates of economic activity and tax revenue, states invest in movie production projects with small returns and take unnecessary risks with taxpayer dollars. Motion picture incentives fail to live up to their promises to encourage economic growth overall and to raise tax revenue. States claim motion picture incentives create jobs, but the jobs created are mostly temporary positions -- often transplanted from other states -- with limited options for upward mobility. Furthermore, the competition among states transfers a large portion of potential gains to the movie industry, not to local businesses or state coffers.”
North Carolina state legislators who opposed cutting the program say they fear the state, once a popular locale for producers seeking tax breaks, will quickly become a production backwater.
For California, this can only be good news. Florida, New Mexico, Wisconsin and now North Carolina have cut incentives programs -- and conservative strongholds like Arizona, Idaho, Kansas, Nebraska, Indiana, South Dakota and North Dakota have all given up on offering hefty tax breaks to filmmakers. Hollywood producers may find that it increasingly makes good economic sense to shoot locally, especially if the bluest of blue states passes a greatly expanded tax incentives program. The California bill has passed the state Assembly and a key Senate panel.
Whether the quirky Brown will side with his fellow Democrats who support the bill, or with Tea Partiers who oppose it, remains to be seen. Even some liberal economists oppose film tax incentives, arguing that the money would be better spent on helping the poor and rebuilding the state’s infrastructure. But without the film and television industry and the jobs it creates and the tourism it brings to the state, there might not be much infrastructure to rebuild, but there will be plenty more poor people to help.