Gessing: New Mexico Film Subsidies Have Not Panned Out


 PAUL GESSING-PRESIDENT-RIO GRANDE FOUNDATION

Like many states, New Mexico has embraced subsidies for Hollywood film companies. Many Americans know our state as the home of meth-making high school teacher Walter White through the popular show Breaking Bad.

As nice as it is to have your hometown portrayed, as it was in the show, as a town full of meth addicts, drug dealers, and cartels; the evidence is that New Mexico’s film subsidies have been an abject failure from an economic perspective.

This, despite the efforts of one local candy shop which makes and sells Breaking Bad-style “Blue Ice” candy at their Albuquerque store.  Two Albuquerque brothers, 10 and 9 years old, were suspended from school last fall for bringing this meth-oriented candy to school. New Mexico has a real drug problem and Breaking Bad is by no means the only TV show or movie to portray rampant drug use and other behaviors. Imagine the mixed messages of using scarce tax dollars to subsidize those films and shows.

Let’s talk about those subsidies a bit. New Mexico’s film subsidy program is often called a “tax credit.” However, that is a misnomer as it is a direct subsidy. In the case of movies, the subsidies can reimburse 25 percent of total taxable costs. In the case of TV shows, 30 percent of taxable costs are be reimbursed by New Mexico taxpayers.

In other words, if I take a film crew out for dinner in Albuquerque and our tab runs to $1,000, the state will cut me a check for $250 or even $300. That’s a sweet deal indeed and one that is not available to any other industry in our state.

According to a 2014 study of New Mexico’s film program requested by the New Mexico Legislature, between 2010 and 2014, the state (taxpayers) paid out $251 million in incentives to the film industry with $103.6 million in state and local tax dollars generated. Due to the way New Mexico’s unique “gross receipts tax works,” this includes $79.1 million to the State government and $24.5 million to local governments.

So, in a best-case scenario, New Mexico’s film subsidies generated 43 cents of tax revenue for every dollar spent. If you look at the film subsidy program’s impact on just the State’s finances in isolation, the program returns a mere 32 cents in revenue to the State for every dollar spent by the State. It is true, of course, that local governments split industry-generated tax revenues of $24.5 million as local governments don’t contribute directly to the film program.

Opposition to these subsidies spans the political spectrum, too.  While conservatives in New Mexico have been active in pointing out the poor returns associated with the state’s film subsidy program, when asked, liberals also acknowledge the program’s flaws. Gerry Bradley, an economist with New Mexico Voices for Children said of the program, “We are involved in a race to the bottom with dozens of other states, dreaming up more and more extreme film incentives. It is time to take a deep breath and pull back from the brink.”

Bradley’s comments echo the views of left-leaning national groups like the Center for Budget and Policy Priorities and Good Jobs First, both of which have panned state film subsidy programs.

In conclusion, there is no economic justification for film subsidies. And, while we generally loathe subsidies of any kind, film subsidies are particular troubling because movies and TV shows are, by their nature, fleeting. Movies film in a matter of months and a really great TV show lasts a few seasons (filming only a portion of a year). The big-name actors go back home and workers must look for other jobs or even file for unemployment at further cost to taxpayers.

At the end of the day, when we evaluate how economic development and incentives stack up, film incentives are some of the very worst.

http://krwg.org/post/gessing-new-mexico-film-subsidies-have-not-panned-out

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