Louisiana's motion picture tax credits grew to $500M since 2018

(The Center Square) — As Louisiana confronts a projected $1.5 billion budget shortfall, the state's costly Motion Picture Production Program, which offers significant tax breaks to film and television producers, is under increasing scrutiny.

From 2018 to the present, the program has issued over $500 million in tax credits to various projects, according to records obtained by The Center Square.

The Motion Picture Production Program offers up to a 40% tax credit on qualified in-state expenditures, making it one of the most generous incentives for film producers in the country. Productions that engage in visual effects work in Louisiana can receive an additional 5% credit if they meet specific spending thresholds.

According to the Department of Revenue, the return on investment of the motion picture incentives was 60.04% for 2023, meaning that for every dollar the government provides in tax incentives or credits, the recipient generated $1.60 in return.

However, as the state grapples with the financial strain of its looming deficit, critics argue the program's benefits do not justify its high cost.

According to a study from Louisiana Economic Development, the program generated $46 million in additional tax revenue in FY 2021 and $51 million in FY 2022. Despite issuing over $131 million and $134 million in credits during those years, the program yielded a return of about 35 cents and 39 cents in tax revenue per dollar of credit, respectively.

This indicates that the state is not fully recouping the value of the credits through direct tax revenue.

If the tax credits issued were over $500 million and the return on investment remained consistent at approximately 35 cents, the state would generate around $175 million in tax revenue. This would result in a net loss of $325 million.

If the ROI were 0.39, the tax revenue would be around $195 million, leading to a net loss of $305 million.

While the state may be losing money from a tax revenue perspective, the study mentions that the program has spurred significant economic activity.

For every dollar in credits, there were $2.47 in additional earnings in 2021, rising to $2.70 in 2022. The program also boosted statewide sales, generating $6.27 in sales per dollar of credit in 2021 and $6.32 in 2022.

Despite these positive economic impacts, the state’s direct tax revenue does not match its investment, raising questions about the long-term fiscal sustainability of the program especially in the context of a billion dollar fiscal cliff.