Public Subsidies

States competing for film projects offer producers and studios $1.4 billion in public subsidies. In a recent year, about $830 million of taxpayer subsidies went to movies with smoking, mostly PG-13.

The first subsidies were sales tax exemptions for goods and services purchased by film crews while on location. Competition between states for projects led to giving away more and more. New Mexico began making interest-free loans to film production companies. Louisiana began rebating a portion of in-state costs with corporate income tax credits.

States then began raising the portion of costs they would rebate or convert to tax credits, with Michigan going as high as 42% and Iowa giving back 50%. Since film companies don’t usually owe any one state much income tax, states allowed producers to sell the credits to in-state businesses or wealthy individuals. Louisiana paid out more than $27 million to accommodate “The Curious Case of Benjamin Button”.

Controversies surrounding public subsidies:

MASSACHUSETTS – The state Department of Revenue released a report finding that only 16% of the wages paid by subsidized film productions went to Massachusetts residents. The report also showed that of the $166 million in tax credits approved since 2006,           $149 million were sold to third parties, “primarily insurance companies, financial institutions, and corporations.”

LOUISIANA – The state’s film commissioner was sentenced to two years in prison for accepting bribes from a film producer in exchange for inflated tax credits.

IOWA – Started program in 2007 and expanded in 2011, allowing companies to rebate up to 50% of costs. Projected annual cost, $300 million. After reports of irregularities and poor record-keeping, the state’s economic development director resigned, the head of the state film office was fired, the tax-credit program was suspended, and a criminal investigation was started.

MICHIGAN – A state budget analyst told the state Senate Finance Committee that the incentives would never pay for themselves.

WISCONSIN – The state Department of Commerce issued a report that the credits provided little net economic benefit for the state.

CONNECTICUT – Connecticut Voices for Children released a report saying that the program’s costs far exceeded its economic benefits.

Not only are states competing with each other, each state is working against itself.

  1. States spend millions for youth tobacco prevention.
  2. States spend millions to lure film production.
  3. Subsidized movies account for 44% of new tobacco addicts.
  4. New addicts mean increased health care costs for states.
  5. States have huge budget deficits.
  6. Allowing the sale of tax credits to undeserving corporations and wealthy individuals, keeps money out of state treasuries.

Two recent examples are The Social Network PG-13 received $4.98 million in tax credits and featured eight un-credited actors smoking. Burlesque PG-13 received $7.23 million in tax credits and featured smoking in many scenes by Stanley Tucci’s character, smoking by Kristen Bell’s character and a Camel cigarettes billboard.

A Canadian research study showed that every dollar invested in subsidizing U.S. film production in Canada, costs $1.70 in tobacco-related health care and productivity.

In April 2011 Washington State Attorney General Rob McKenna petitioned to amend the state’s film subsidy rules to “provide that productions with tobacco imagery or reference will not be eligible for funding.” “Any subsidy of entertainment products that influence kids to smoke runs counter to Washington State’s own strong public policy of reducing and preventing youth tobacco addiction.” The Legislature ended the subsidy program.

In 2010 fifteen states subsidized the type of big-budget movies that deliver more than 90% of tobacco impressions. Two-thirds of those states spent more on Hollywood movies with smoking than on their own tobacco prevention programs.