By John C. Mozena
Utah is poised to become the latest state to fall for Hollywood’s “job creation” promises as the state Legislature moves forward on a bill that would lift the cap on film subsidies in the state. As the House considers S.B. 49, which was passed 20-7 by the Senate last month, it’s worth looking at the experiences of states that have discovered the hard way that Hollywood studios are in the business of making money for themselves by selling fantasies to everyone else.
One of the biggest problems with Utah’s taxpayers getting into the film financing business is that Hollywood’s infamous accountants come along with the deal. They’re known for making the numbers say whatever’s best for their studio, at the expense of anyone else who has a stake in the picture. For instance, David Prowse, the actor who played Darth Vader in 1983’s “Return of the Jedi,” still hadn’t received a profit-sharing check in 2011 because studio accountants were able to keep one of the biggest movies of all time from turning a profit despite almost three decades of merchandising and re-releases. Other massive movies that Hollywood accountants turned into official money-losers have reportedly included the “Lord of the Rings” trilogy, “Forrest Gump,” “Rain Man,” “Spider-Man,” “Harry Potter and the Order of the Phoenix” and the original “Batman.”
More importantly for Utah, Hollywood’s creativity with accounting also applies to job creation. In Georgia, an official state audit found that employment data from the Motion Picture Association of America used to calculate job creation was massively inflated by including such “film industry” jobs as movie theater concession stand workers. “More than half of the Georgia jobs are in activities unrelated to film production,” the auditors concluded, meaning that once you subtracted people making popcorn in the local cineplex, the actual job creation was less than half of what was claimed.
Georgia’s experience is important, because film tax credit cheerleaders point to Georgia as a state that Utah should be competing with in film subsidies. However, Georgia’s film credit program is closer to a grisly horror movie than a feel-good hit. It’s become the single biggest tax credit program of any kind in the state, and it’s a giant money loser. An official audit found, “The $667 million in credits generated in 2016 resulted in an estimated $602 million net revenue loss to the state.”
What that means, an independent analysis found, is that film credits were costing every household in the state an average of $220 per year. The true cost of film industry jobs was $119,000 per full-time film production employee, a price that should make Utahns stop and reconsider whether there are better ways to encourage job creation in rural communities and elsewhere around the state.
The auditors also found that the film tax credit program was “an ideal environment for fraud,” and that Georgia’s taxpayers were regularly subsidizing workers and activities that benefited other states. In the best Hollywood accounting tradition, auditors found films receiving credits for things like “lost petty cash,” parking tickets and $54,000 worth of private jets for studio executives.
Georgia isn’t the only cautionary tale. Michigan, for instance, had a film tax credit that lasted seven years, cost $500 million and ended up with fewer film industry jobs in the state than when it began. State auditors found that the program returned just 11 cents on every dollar spent, and it was such an undeniable disaster that even the legislator whose own wife ran the tax credit program in the Michigan Film Office voted to eliminate them in 2015.
In Massachusetts, a 2015 state audit found that thanks to Hollywood’s accounting games, less than half of vendor spending and only a third of wages truly went to in-state recipients, with the rest heading out of state. The audit also found that each new in-state job cost taxpayers $102,888 in subsidies.
The writer Dorothy Parker, who received two Academy Award nominations in the 1950s for her screenplays, once said, “Hollywood money isn’t money. It’s congealed snow, melts in your hand and there you are.”
Utah shouldn’t be the next state where taxpayers are left with empty hands after Hollywood’s promises have melted away.
John C. Mozena is the president of the Center for Economic Accountability