Georgia on my Mind: Are the Benefits of Film Incentives Inflated?

February 19, 2020

Carine Martinez

Carine Martinez joined the Foundation in 2016 and is campaign director of Secure and Sovereign Texas and has been director of research and publications since 2021.

As campaign director, she oversees the Foundation’s initiative to look for additional and innovative policy solutions for the state of Texas to help secure its southern border.

As director of research and publications, she oversees and manages the publication schedules for all policy areas the Foundation is working on and is responsible for editing research publications.

Carine also conducted research on Texas–Mexico paradiplomacy, as well as, earlier on, on the effects on taxpayers and consumers of government programs that grant special privileges to certain businesses in the form of subsidies, tax credits, regulatory advantages, or other favors.

She is the co-editor of the Foundation’s Policymaker’s Guide to Corporate Welfare and is the author of several research publications, notably on film incentives, the hotel occupancy tax, and the three-tier system of alcohol distribution. She testified on these issues before the Texas Legislature during its 85th and 86th regular sessions. She was published in several newspapers including the Austin American-Statesman, The Hill, and Forbes.

Carine began working in public policy as a policy intern at the Foundation in 2014. She later worked as a policy analyst for Texas Action during the 84th Legislature and then spent a year in Washington, D.C., working as a research associate for the Charles Koch Institute.

She holds a bachelor’s degree in international business administration (completed in English, French, and Spanish) and a master’s degree in American studies from the Sorbonne in Paris, France.

Carine is originally from Paris, France, but happily moved to the United States in 2011 and finally to Texas in 2013. She became an American citizen in 2019.

Despite the many studies that found problems yet little positive effects from state film incentives, “just an old sweet song” keeps Georgia’s program on our mind. Georgia, we are told, has created tremendous growth for its film industry by offering a very generous tax credit, so much so that it is now called the new Hollywood of the South (we’ve heard that before for another state, with questionable outcomes).

However, two audits conducted by the Georgia Department of Audits and Accounts (DOAA) — one on the administration and one on the impact of Georgia’s film tax credit — and released in January 2020 shed some light — or rather cast a shadow — on the much-praised program.

According to DOAA, Georgia’s incentive program generated more than $3 billion in credits between 2013 and 2017 and is the state’s largest tax credit. More than $667 million in credits were generated in 2016 alone, and $915 million in 2017. Georgia “has the largest film incentive of any state by the amount generated.”

However, DOAA’s audits report, lax requirements regarding the documentation needed to claim the credits, no mandatory auditing of projects, control weaknesses, the fact that the credit is transferable and can be carried forward for up to five years, created “an environment ideal for fraud” and resulted in some productions receiving credits for which they were not eligible.

Moreover, DOAA concluded that the impact of the tax credit had been exaggerated: “the information available to decision makers regarding the credit’s impact has been incomplete and inaccurate. The economic impact and jobs attributable to the credit have been overstated, even before considering the cost of the credit.” The Georgia Department of Economic Development, the audit states, “used an inflated multiplier to calculate credit-related economic activity and has reported misleading job numbers,” including jobs not related to the credit.

As was the case for many other states’ film incentive programs, Georgia’s program created a fiscal cost to the state: “while the economic activity resulting from the credit generates revenue, the additional revenue is not sufficient to offset the credit.” In addition, the ability for taxpayers to carry forward the tax credit creates uncertainty on when the credits will be claimed. As of March 2019, there were $1.7 billion in outstanding credits.

Both audits also found that some of the program’s benefits went to other states. For example, “while Georgia residents held most of the jobs in the period studied, most of the wages were paid to non-residents, including highly paid, out-of-states actors.” Some expenditures to out-of-state vendors that did not meet the eligibility requirements were nevertheless allowed to count toward the credits. Finally, many production companies are not based in Georgia and have little to no income tax liability in the state. As a result, most of the credits are sold — “approximately 80% of credits generated in 2016 have been transferred by the production company to another Georgia taxpayer.”

These are only some of the serious issues Georgia’s DOAA found. The two audits can be found here.

The audits can serve as a cautionary tale: Texas should not envy Georgia’s program. As the same patterns of inefficiency, fiscal cost, and inflated impact keep coming up in audits and studies of different state film incentive programs, Texas would do well to consider getting rid of its program and returning the money currently handed out to film productions to taxpayers instead.

Carine Martinez

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