Movies get a tax break to film here, but should they?
Utah wants big-budget film producers to know it is open for business—and is willing to pay.
The Governor’s Office of Economic Opportunity approved 13 productions for tax incentives earlier this year on the basis that they’ll bring more than $140 million in revenue to the state. Already, the move has made waves, attracting several major projects from Oscar-winner Kevin Costner and a host of independent films. One of the biggest, with a budget of more than $10 million planned to be spent in Utah alone, is an adaptation of the popular video game Fallout.
Joining a chorus of states and cities trying to attract film crews, Utah passed a law in March awarding a 20 or 25 percent tax break for crews that spend $500,000 or $1 million, respectively. In order to get a 25 percent break, production companies do not have to be based in the state but do have to either hire three-quarters of their crew locally or shoot three-quarters of their filming days here.
Altogether, filmmakers used to earn back $8.3 million from Utah as a cap. The new law allows that number to be greatly expanded if a production’s budget is big enough.
This year, at least five other states—Indiana, Illinois, New Jersey, West Virginia, and Washington—have increased their benefits to try to attract business.
The tax break in Utah only applies to goods and services bought within the state, so it can’t be used for the salaries of out-of-state crew members. Still, for some of these projects, the apparent savings can be many millions of dollars. This is different from controversial programs in other states, like Georgia, which has drawn criticism for allowing the salaries of out-of-state, top-billed actors, producers, and writers to be written off. At the same time, major productions like Netflix’s “Stranger Things,” and Marvel’s “Black Panther” both shoot in that state.
The idea of film incentive programs is that film productions inject huge amounts of money into a local economy during production, using a wide variety of services and industries. Since the 90s, these programs have sought to attract business, allowing companies to bypass taxes and spend that money directly with local businesses. Critics, however, point to research that shows incentives don’t lead to real economic growth for states.
Utah’s $500,000 figure might be easy for productions to reach in theory, with the average major film budget clocking in around $100 million. But competition in filming and the specific needs of each community create roadblocks. Dozens of potential shooting locations have incentive programs, leading to a wealth of options for producers. Utah has to compete with other states, some of which have no minimum amount to qualify—or have an easy mark, like Maine’s $75,000 minimum.
As productions take advantage of tax incentives in places like Georgia and New York City, a culture of building filming around tax laws has grown. Line producers and accountants plan their filming around days they may qualify for a benefit, looking to maximize their savings and satisfy nervous investors. Producer Mary Jane Skalski, who worked on films like Win Win and Pariah, spoke to CinemaBlend to explain why she felt the culture makes sense for everyone.
“Very few businesses look to spend 100 percent of their capital the way a film does. We come to a place, and we spend,” she told the site. “We employ people directly to work on local crews, indirectly we support a lot of ancillary businesses—catering, hotels, lumber, paint, supplies, office equipment, vehicle rentals, gas, parking, car services.”
But for states, the cost can be high. New York, for example, forfeits $420 million annually in taxes due to film production. Georgia, meanwhile, issued $1.2 billion in credits. Economists and policy-watchers have criticized these programs, arguing they destroy state budgets on the belief that funneling money into the local economy will balance out the losses.
One 2012 California government report criticized these kinds of incentives, arguing that politicians had overstated the benefit. Meanwhile, a 2016 USC study found that production tax breaks led to little or no growth within local economies. The author of that study, professor Michael Thom, criticized the industry for needing tax breaks at all. “This is a multi-billion dollar industry,” he told Variety at the time.
A 2020 audit in Georgia claimed the state reported bloated numbers around job-growth due to the program. A Pennsylvania governmental report echoed this sentiment, saying “it is difficult to see the impact of the tax credit in employment and GDP data for the last five years.”
Virginia’s auditors joined in, saying: “The film tax exemption has little effect on film location decisions, a negligible benefit to the Virginia economy, and provides a negligible return on the state’s investment.”
All of this has led several states—13 of them by 2020—to ditch their incentives programs.
Productions have fed into this problem by punishing states that either end their incentive programs or have none at all. In 2019, when Florida ended its program, HBO’s “Ballers” stopped filming there and went to California, using stock footage to make future seasons look like Miami.
At the same time, Hollywood has seen a major blow to its own filmmaking economy due to programs like this. Historically, films were primarily shot in the Los Angeles area due to practical and economic concerns, but as the financial realities have changed in the past three decades, more productions have left.
This has led to an increased diversity of locations and crew on projects, as well as filming in authentic locations instead of Hollywood lots. But it’s come at the cost of a patchwork set of laws that has thrown the industry into constant flux. Politicians have to navigate conflicting messages from producers, the public, and policy experts.
In Utah, for example, Costner lobbied state senators to pass the 2022 incentives program. As a result, he promised lawmakers to film five new projects in Utah, including “Horizon,” a project he is directing. The lobbying carried heavy threats: Costner’s Paramount Network show “Yellowstone” famously moved its filming to Montana for tax incentive reasons, and he threatened not to shoot any of his upcoming films in Utah if the state didn’t pass better incentives.