No Need to Sacrifice Babies for Hollywood Lucre

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by Bruce Walker  •  ChurchMilitant.com  •  June 1, 2019   

Georgia could easily survive economic impact of film industry boycott

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SAVANNAH, Ga. (CHURCH MILITANT) - Boycott threats from the film industry in response to Georgia's pro-life law may garner headlines but may be a case of members of a "woke" industry cutting off their nose to spite their face.

At issue is Hollywood's stated mission to punish Georgia financially because the state passed a bill that would make abortions illegal once a baby's heartbeat can be detected.

Threats by Hollywood players such as NBCUniversal to boycott the state if the law goes into effect in January 2020 possess far less teeth than previous bullying. As it turns out, the industry stands to lose far more financially than the state passing out money hand over fist in the name of job creation and bragging rights to several high-profile entertainments like Disney's Black Panther and Avengers: Endgame and Netflix's Stranger Things and Ozark.

Revenue streams from the state's extremely generous tax incentives benefit the filmmakers far more than the jobs and revenues promised Georgia's economy.

Without the slightest trace of irony, the online platform Netflix has suggested it may join other companies in the Georgia boycott should legal machinations fail to block the law, while Netflix recently announced it was expanding its operations in Jordan and Egypt, where abortion is illegal, punished with imprisonment.

A similar boycott strategy was deployed successfully against South Carolina when legislators there proposed a "bathroom bill," which would have prohibited transgendered individuals from using multiple-use restrooms not aligned with their biological sex. Another successful boycott threat was mounted against Indiana to protest its 2015 Religious Freedom Act, which Forbes estimates cost the state $60 million in lost revenue.

But the case in Georgia is vastly different and may very well backfire on Hollywood. In fact, revenue streams from the state's extremely generous tax incentives benefit the filmmakers far more than the jobs and revenues promised Georgia’s economy.

A 2017 study of Virginia's film incentive program, for example, shows just how little the film industry benefits a state's economy. According to the Joint Legislative Audit and Review Commission report, Virginia's tax incentives returned only "20 cents per dollar invested for the tax credit."

In short, if Disney, NBCUniversal and Netflix pull the plug on Georgia, it might be a good thing for the Peach Tree state, neutering Hollywood's coercion if not rendering the result of its threats completely desirable.

Georgia offers a tax incentive of 20% to filmmakers to qualified productions, and adds another 10% to the kitty (30%) for productions that include a Georgia Entertainment Promotion Logo in the end credits. The high percentages of the credits make Georgia highly competitive with other states' film incentives and has been reported to generate $6 billion in annual revenue. But some economists doubt the effectiveness of such schemes to generate long-term jobs and sustainable revenue for the state.  

According to Nathan M. Jensen, a University of Texas economist and co-author of Incentives to Pander: How Politicians Use Corporate Welfare for Political Gain, the claims for film industry tax incentives are significantly overblown.

"Incentives are economically inefficient (at best) and are mostly used by politicians to take credit for investment coming to their state," he stated in an email to Church Militant.

Jensen added: "These film incentives, even relative to other incentives, are very, very lucrative. Getting back 20% to 30% of your production costs is complete madness and there is no real way for the state to recoup all of these lost revenues."

Jensen also notes that, in many cases, companies will relocate to a state regardless of the tax incentives offered by politicians. What's more, he adds (and several studies concur), many of these jobs aren't permanent, last less than one year and are seldom high-paying.


Quoted in the Detroit Free Press, James Hohman, an economic policy analyst for the free-market, Michigan-based, Mackinac Center for Public Policy, noted a similar film-industry tax-incentive program in the Great Lakes State recognized negligible financial gains.

"A 2010 report from the Senate Fiscal Agency said each dollar spent on what were then refundable film tax credits generated only about 60 cents worth of private sector activity, and each job directly created by the program cost taxpayers as much as $186,519 to create," he wrote.

"Scholars across the spectrum agree that subsidizing filmmaking is a waste of taxpayer dollars," he added.

In addition, Georgia's tax credits are transferable, which means they may receive a credit whether they owe any taxes or not.

"With transferable tax credits, Georgia provides incentives worth 20 to 30 percent of a production company's total spending in the state, benefits that can easily reach millions of dollars for a major movie," according to a 2012 Pew Trusts analysis by Josh Goodman. Elsewhere, he explains:

States, though, have become adept at providing tax breaks larger than businesses' tax burdens — to, in effect, make a company's tax burden a negative number. One way they do that is through "transferable" tax credits. If the value of a company's credits is higher than its tax liability, it can sell the excess credits to another taxpayer who owes the state taxes.

A whole industry has developed to broker the sale and purchase of these credits. Yes, the transactions are complex but, for some Fortune 500 businesses, says Goodman, extremely lucrative. Sellers are prohibited to sell their credits at full value, so typically settle at 85 cents to 90 cents on the dollar. Goodman explains that, because the transferable credits are sold upfront, filmmakers can use the income from the transaction to help pay for the projects they have yet to produce.

Looks like Georgia found a way to stop wasting money without having to do the hard work of repealing its film subsidies.

And Georgia residents fall far short of the income earned by their Hollywood counterparts. The Atlanta Journal Constitution reports union background extras earn only $18.50 an hour. Since Georgia is a right-to-work state, many background extras earn only $8 an hour.

"In an industry where employees average six figures a year, a background extra humbly makes about $10,000," the article states.

When contacted by Church Militant to comment on the current threats of a Hollywood boycott of Georgia, Hohman responded, "Looks like Georgia found a way to stop wasting money without having to do the hard work of repealing its film subsidies."

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