But has North Carolina’s film tax incentive really benefited our economy?
Proponents of the film production tax credit spin this tax loophole as a program to create jobs. Any economic study worth its salt will analyze the effect of the program itself, then analyze the opportunity cost for the same amount of money in a different area. Fortunately, that is exactly what the nonpartisan Fiscal Research Division at the N.C. General Assembly did.
Last year, the Fiscal Research Division analyzed the economic impact of North Carolina’s film production tax credit program for 2011. The analysis concluded that the state awarded $30.3 million in film tax credits during that year, which resulted in 55 to 70 jobs and generated approximately $2 million in personal income.
The analysis concluded that an “across-the-board tax reduction of $30.3 million would have yielded between 370 and 450 new jobs and $14 million in personal income.”
It does not take a degree in economics to determine which of these scenarios creates a better economic outcome for North Carolina.
Decker has fallen for the myth that special interest tax credits and incentives – tax changes designed to steer benefits to a specific industry – are the best way to create jobs. Although targeting benefits in this way often seems like a good idea, such tax credits only lower taxes for a select few and cause distortions in the tax code.
By reducing the tax burden of a single targeted industry or company, the marginal tax rate for everybody else increases if overall government spending is not also reduced by the amount of the credit. In other words, tax credits are corporate welfare. All taxpayers bear the cost, but only a handful of special interests and favored industries benefit.
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