If it were a film, North Carolina’s subsidy program wouldn’t be a box office smash. A recent study from the Western Carolina University Center for the Study of Free Enterprise says the $400 million North Carolina taxpayers have invested in film subsidies has failed to pay dividends.
Kennesaw State University economics professor John Charles Bradbury conducted the study. He isn’t impressed by the return to taxpayers. “North Carolina’s film incentives, which have cost the state over $400 million, do not appear to have delivered the promised economic boost. For this reason, policy makers may wish to reconsider the state’s commitment to the incentives,” Bradbury wrote.
Focusing on investment through tax revenue along with where the money was spent and whether a project created lasting jobs and film-related businesses, the results of the study weren’t pretty.
The study argues that few companies choosing to film in North Carolina actually create jobs. Many bring their talent and crews from elsewhere. Bradbury also cites economists Mark Owens and Adam Renhoff and the General Assembly’s Fiscal Research Division, which showed in a study that for every dollar spent, North Carolina gains less than 25 cents in return. This is better than most states with subsidies, such as Maryland, which yields about ten cents on the dollar.
In 2000, the Tar Heel State established the Film Industry Development Account, which gave grants to production companies that filmed in the state. Subsidies initially covered up to 15% of direct production spending for films, with caps for the grants set at $200,000.
In 2005, the grant program became a refundable tax credit which, in 2010 at its most generous, gave a tax credit of 25% for production-company spending inside North Carolina and raised the allowable subsidy to $20 million per film. In 2014, the General Assembly allowed the program to sunset and reverted it to a grant program. In 2018, the program was authorized to spend no more than $9 million. To qualify, a filmmaker had to spend at least $3 million in North Carolina.
From The Color Purple, Dirty Dancing, The Green Mile, to The Last of the Mohicans, North Carolina has hosted film productions that didn’t use subsidies. Filmmakers have chosen North Carolina as a location for the state’s geography, climate, and competitive cost-of-living.
Jon Sanders, director of regulatory studies at the John Locke Foundation, concurs with Bradbury and the study. “Rather than chasing this industry or that with special giveaways, the better approach is to create a pro-growth environment within the state’s borders with low taxes, light regulation, and responsible spending.”