Lawmakers realize film-tax credits may be a box-office flop

The Georgia General Assembly experienced historic turnover following the November 2022 elections. Around 50 incumbents opted against running for re-election, and Georgians ultimately ended up with a new speaker of the house and lieutenant governor.

With new leadership comes new priorities, and some of the Legislature’s recent pivots have been a welcome change. Despite being run by conservatives for decades, Georgia has a history of doling out massive corporate handouts in the form of tax credits, but the state’s new leadership demonstrated their willingness to challenge the status quo.

“Lt. Governor Burt Jones and Speaker of the House Jon Burns announce their respective appointees who will work on behalf of the Georgia General Assembly to review […] all Georgia tax credits, including Georgia’s film tax credit,” a press release from the lieutenant governor’s office reads. “This review is intended to support Georgia businesses while ensuring a significant return on investment for Georgia’s taxpayers.”

That’s encouraging news and cause for cautious optimism. For years, film tax credits seemed virtually untouchable to reform-minded lawmakers—save for some marginal reforms—even though the program’s return on investment has come into question.

First passed in 2005, Georgia’s film tax credit program exploded as policymakers rolled out the red carpet to entice filmmakers to work in the Peach State. Georgia regularly ranks in the top three states for film production, which proponents point to as proof of the subsidy’s success.

As the Atlanta Journal Constitution noted, this shouldn’t be a surprise, nor is it necessarily proof of success: “If the state subsidized 30 percent of the cost of manufacturing toilets, Georgia would be the toilet capital of the world. The question is if there are better uses for [the lost tax revenue].” To date, Georgia has handed out billions of dollars’ worth of tax credits to encourage filming in Georgia, and in doing so, subsidized already rich corporations.

Despite supporters touting the program’s supposed history of sparking a massive economic impact in Georgia, purportedly including $6 billion in 2015 alone, experts and even government officials aren’t so sure. In fact, the Georgia Department of Audits and Accounts Performance Audit Division released a troubling report on the program in 2020.

“The impact of the film tax credit on the state’s economy has been significantly overstated, leaving decision makers without accurate information necessary to assess the credit,” according to the report. “The film tax credit results in significant revenue loss for the state by reducing income tax revenue that would have been paid otherwise.”

This is consistent with findings elsewhere. Studies on other states’ film tax credit programs have exposed the low return on investment—ranging from 15-65 cents per dollar lost or expended to film subsidies. Of course, supporters of film tax credits will say that the program is intended to spur economic development and create jobs, but studies suggest the credit has an underwhelming track record and benefits plenty of out-of-state companies and individuals.

A Georgia Budget and Policy Institute study found, “88 percent of companies participating in the program are based outside of Georgia.” Even more concerning, as the Georgia Department of Audits and Accounts noted, “The film tax credit is not designed to incentivize hiring residents over nonresidents; it provides the same credit regardless of workers’ residency. While Georgia residents held most of the jobs (80%) associated with the credit, most wages (53%) were paid to nonresidents.”

The evidence is pretty clear. The film tax credit’s economic impact, return on investment and ability to help Georgians in a targeted way is lacking. While it’s neat to have movies and TV shows filmed in Georgia, taxpayers should have serious concerns with these corporate handouts.

These aren’t new problems either, and there have long been grumbles within the General Assembly about this problematic program. However, getting to a resolution has proven difficult. Now that different leaders are at the helm in the House and Senate, perhaps lawmakers will be able to make meaningful reforms.

The joint study committee on tax credits looks to begin meeting later this year, and will likely host numerous public hearings before January 2024. It is highly doubtful that legislators will seriously consider repealing the program. If they are determined to keep it, then they need to reshape it into a program that serves Georgians more adequately.

While it is far too early to tell whether they will propose transformative or just marginal changes to the film tax credit program, look for this to be taken up when the Legislature reconvenes in early 2024.