The Motion Picture Association is disputing the findings of a new USC study that said “billions of dollars in state entertainment industry tax incentives don’t bring promised jobs.” The study was funded by the Koch Foundation, whose billionaire brothers — Charles and David Koch — virtually destroyed the Florida’s film industry four years ago when they backed legislation that ended the state’s long-running tax-credit program.
“It’s no surprise that the research was funded by the Koch Foundation, which has a long history of leading a campaign to eliminate state production incentive programs,” said Vans Stevenson, the MPA’s SVP State Government Affairs. The MPA, which supports tax incentives, said, “It is unfortunate that a well-respected academic institution that counts some of the greatest filmmakers, directors and actors among its alumni, is promoting this fundamentally flawed research.”
Read the study here.
Michael Thom, an associate professor at the USC Sol Price School of Public Policy who is the study’s lead author, wrote: “Even in instances where the study finds an uptick in employment, the jobs created come at a very high cost. States are essentially paying billions of dollars to create a relatively small number of jobs, which isn’t a prudent use of taxpayer money.”
According to Thom: “The states investing the most in incentives are not getting the return on investment taxpayers deserve, pure and simple. These incentives cost taxpayers billions of dollars, at a time when that money could be directed to other much needed public services.”
The MPA, which rebranded from MPAA last month, took issue with a similar study Thom produced three years ago that found that state incentives programs aimed at luring productions away from California and New York had “little to no sustained impact on employment or wage growth” in their states.
The MPA accused Thom of “academic malpractice” three years ago, stating that his study was so flawed that it not only “severely tarnishes” his own reputation but USC’s as well.
“Reputable economists have found that Professor Thom’s previous work had serious deficiencies, and this study is no different. In addition to poor data selection and problems with methodology,” the MPA said in a statement. “Thom’s repeated dismissal of positive effects from production incentive programs demonstrates a clear pattern of bias.”
Deadline reached out to Thom for comment but has yet to get a response.
Thom’s latest study, which examined the tax incentive programs in New York, Louisiana, Georgia, Connecticut and Massachusetts, found that “in most cases, motion picture incentive programs had no statistically significant employment impact. Findings that achieved statistical significance nevertheless failed to show practical significance. These uninspiring employment effects reiterate those in other econometric and state-specific MPI program assessments. And they further reinforce the existing literature’s general conclusion that, as an economic development strategy, targeted incentive programs that carry large tax expenditures fail to encourage meaningful job creation.”
It’s the same argument that the Koch brothers used to kill Florida’s tax incentives – and the state’s film industry – back in 2015. Thom’s latest report notes that “the author disclosed receipt of the following financial support for the research, authorship, and/or publication of this article: Koch Foundation.” The MPA notes that forms the Koch Foundation filed with the IRS in 2017 reveal that the foundation gave more than $700,000 in grants to USC, including $13,705 to the Sol Price School of Public Policy.
Challenging the new study’s findings, the MPA said:
“The study focuses on the wrong metric by measuring year-on-year percentage change rather than real employment figures. Percentage point change is related to the size of the value, masking real changes in larger numbers, while producing potentially large jumps in smaller figures that may not be meaningful. In other words, the study over-emphasizes changes in small states. Additionally, the use of percentage point change suggests that only growth (increase in employment) is important, when maintaining production and employment in a state also matters, and in some cases may be the aim of an incentive program.
“The study does not account for how incentives and competition work. The model includes controls for percentage point changes in incentive spending in other states and Canada but cannot account for how production/employment would have been allocated without the presence of incentives, regardless of how spending year-on-year changes. For example, the presence of Canada’s incentives influences the location choices of productions, even if overall incentive spending in Canada is flat.
“Interestingly, even with these issues, the primary explanatory variable (percentage point change in own-state tax expenditures) included in the paper does find positive and significant effects on percentage change in employment in Louisiana, Georgia, and Massachusetts, along with an initial impact effect of incentives in Connecticut and a positive, ongoing effect of incentives in Louisiana. Thom dismisses these results for various reasons, but they suggest that increased spending on incentives can have an effect on employment and that with properly structured data and models, measurable effects would likely be greater than shown by the current analysis.”