Research from USC Price School Professor Michael Thom has shown that state film tax credits have little to no impact on film employment and end up costing states.
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President Donald Trump is not exactly known for being a fan of Hollywood, but his latest tax proposal would be a boon for film studios. But would it be a boon for taxpayers?
Last week, Trump called for a federal tax credit to incentivize studios to film more movies and television shows in the U.S. Such an incentive would add to the trend of states spending billions of dollars to lure film productions.
“The amount of money spent on Tax Incentives will be made up tenfold by the money pouring into the Treasury’s coffers,” Trump wrote on social media. “Congress should approve, immediately, a Federal Production Incentive to create Entertainment Jobs in America.”
However, research from USC Price School Professor Michael Thom has shown that such tax incentives have little to no impact on film employment while costing states a lot of tax dollars that could be spent elsewhere. We caught up with Thom to discuss Trump’s proposal and how similar tax credit programs have fared in the past.
Why is the federal government now interested in offering tax incentives for film production?
It’s safe to say the industry, its unions, and some prominent actors, including Jon Voight, lobbied for it.
You’ve studied these tax incentives at the state level. In a nutshell, what are your findings about their economic benefits?
There aren’t any real benefits because they don’t create many jobs in the industry. In fact, the incentives stimulate so little economic activity that states offering them, including California, lose significant sums of money: anywhere from 75 to 95 cents on the dollar. Those losses have to be covered with tax increases, spending cuts, or both.
Would you expect a federal film tax incentive program to produce similar results?
A federal incentive would fail, too, but on a greater scale. Although the president claimed the cost of a federal program would “be made up tenfold by the money pouring into the Treasury’s coffers,” there is quite literally zero evidence to suggest that’s possible.
If states aren’t getting bang for their buck, why do they keep offering these tax incentives?
Lobbying from the industry, from unions, and from the state film offices and economic development agencies that hand out the incentives. State legislators and governors clearly aren’t looking at the evidence, including the evidence from their own auditors and analysts.
Is there a better strategy for attracting/retaining film productions in the U.S., including in L.A.?
Not really. The industry is in a long-term decline, similar to domestic auto manufacturing in the 1970s and 1980s. The drop accelerated after the SAG-AFTRA strike ended in late 2023, with a new contract that imposed higher labor costs. That’ll impact L.A. disproportionately, just as the collapse of GM, Ford, and Chrysler hit Detroit particularly hard.
