Efforts to draw film industry to Kansas may not be the blockbuster lawmakers envision

Imagine a movie you’re eager to see. How many negative reviews would it take for you to decide not to see it?

Film tax credits are the public policy version of that bad movie. All the reviews are scathing — yet state legislators keep buying slick Hollywood pitches.

This time, it’s Kansas’ turn. The Kansas Film and Digital Media Production Development Act (HB 2097) would create a sales tax exemption and nonrefundable income tax credits for qualifying production activities. Typical to the boosterism that accompanies such efforts, Kansas State Rep. Stephanie Clayton tweeted, “Perhaps we'll have a Hallmark Christmas Movie filmed here one day.”

Kansas Gov. Laura Kelley may have already signed this bill into law by the time you’re reading this — it passed by wide margins in the Senate and House. Yet efforts like this have earned negative reviews in other states — like Missouri.

The Missouri Legislature recently revived a film tax credit allowed to expire in 2013. Why was it allowed to expire? Because, according a 2010 report by the Missouri Tax Credit Review Commission, “This tax credit serves too narrow of an industry and fails to provide a positive return on investment to the state.”

According to the Bureau of Labor Statistics, while the Missouri film tax credit was in place, film-production jobs in the state actually decreased!

The 2014 thriller "Gone Girl" was filmed in Missouri, and tax credit supporters cheered it as a success. But an analysis estimated the state granted the production $2.36 million in tax credits but only received $609,225 in tax revenue.

Then there is the issue of how a state is depicted in the films they might subsidize. Discussing Missouri’s film tax credit in 2019, one legislator claimed that, if tax credits weren’t a consideration, Missouri would outperform other states in being a filming location due to our “work ethic and the pride.”

Unfortunately, the projects this legislator regretted missing out on were "Three Billboards Outside Ebbing, Missouri" and "Ozark" — not exactly flattering portrayals of Missourians.

And wasting money on investments that fail to provide a positive return isn’t a good work ethic; it’s careless.

If film tax credits were a Hollywood franchise, it’d be bigger than "Star Wars" or the Marvel Cinematic Universe, with new installments at every turn. A 2018 study from the Beacon Center of Tennessee found “using available box office data, over 40 percent of films that receive grants made less at the box office than they received in incentives.”

Read that again; it is a stunningly bad track record.

There is plenty of academic research on these tax credits that show they’re policy flops. A 2016 study in The American Review of Public Administration examined film tax credits in 40 states from 1998 through 2013.

The conclusion? Sales and lodging tax waivers have no effect: “Transferable tax credits had a small, sustained effect on motion picture employment levels but no effect on wages.” Refundable tax credits also had no employment effect, and “Neither credit affected gross state product or motion picture industry concentration. Incentive spending also had no influence.”

The Journal of Contemporary Economic Policy examined states that used film tax credits from 2000 to 2015. The conclusion finds, “The film industry may be bolstered by movie production incentives, similar to other studies; however, any gains do not spillover into the overall economy.”

Perhaps most damning, a 2020 report from the Georgia Department of Audits and Accounts — the state supposedly seeing all this success with their film incentive programs — concludes, “The state’s return on investment for the credit was 10 cents for each dollar, though local governments received an additional return of 11 cents in revenue.”

Hollywood has gotten very good at recycling old ideas and relying on blockbusters.

In a sense, film tax credits are both: An idea recycled again and again before starry-eyed legislators, as well as a windfall for an industry with gross margins of more than 41%.

No state needs to use public resources this way. And that includes Kansas.

Patrick Tuohey is co-founder of Better Cities Project, a 501(c)(3) nonprofit focused on municipal policy solutions, and a senior fellow at the Show-Me Institute, a 501(c)(3) nonprofit dedicated to Missouri state policy work.