How Much of That Oscar Statue Did You End Up Paying For?

It doesn’t matter whether or
not you saw any of this year’s top Oscar-nominated films. Depending
on what state you lived in, you may have paid for it anyway. At the
Economic Intelligence
blog of U.S. News & World Report Matthew Mitchell
points out that each of the top films has received huge tax credits
or subsidies (both in the United States and the United Kingdom) and
provides a fine list of reasons why these are such bad deals for
taxpayers, presented in award show format:

1. Best economic
argument — film subsidies don’t work as
advertised: Film companies and their lobbyists have
sold these schemes to some
45 states on the grounds that subsidies and tax breaks today
will somehow “pay for themselves” through more revenue tomorrow
(call it M.C.
Escher economics). But if this sounds too good to be true,
that’s because it is. As my colleague Adam Thierer
has noted, eight out of 10 studies of the subject find that
these schemes lose more revenue than they generate. The two studies
finding positive effects were both paid for by state film
offices.

This finding is consistent with a large literature on
firm-specific or “targeted” economic development strategies. As a

recent study puts it, “the wisest course of action for most
cities would be to eschew particularized development incentives,
especially those that require tax expenditures.”

2. Best supporting economic
argument — film subsidies encourage
unsustainable economic models: With its abundant
sunshine, Florida is ideally suited to the production of citrus;
and with its large concentration of engineers, Silicon Valley is
ideally suited to the production of advanced technology. These

comparative advantages may change as tastes and technology
change. At least for now, however, it makes sense to grow oranges
in Florida and to develop technology in Silicon Valley. That’s
because these economic models are based on what economists Frederic
Sautet and Pierre Desrochers have
called “regional realism.”

The fundamental problem with targeted economic development
incentives is that they attempt to foster fundamentally unrealistic
economic models. If film producers in your state do not have a
comparative advantage in producing a particular movie, they
shouldn’t be producing it. Policymakers are building unsustainable
economic models when they incentivize the development of an
industry that cannot survive except by dint of its
government-granted privileges.

There are seven additional arguments that follow. Read them all

here. A list of subsidies/tax credits for the top-nominated
flicks can be found
here.