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At Issue: Planting a Flag

Everyone by now knows that Georgia is one of the top locations in the world for movie and TV production. In fact, in 2016 the state was No. 1 in terms of the overall number of productions.

That’s great. But how did this happen? Two words: tax incentives. Georgia began heavily investing in the entertainment production business about 10 years ago. In that span of time, the state, and taxpayers, have subsidized movie and TV production companies to the tune of about $2 billion through FY18.

The Georgia legislature, spurred on by the last two governors and the state’s economic development office, has established and maintained a program that allows movie and TV productions a tax credit of up to 30 percent for projects produced in the state.

That’s a big-time investment. Is it worth it? It depends on who you ask. The current governor loves it, and legislative leaders are quite fond of it. Economic development interests and financial leaders in the state are very supportive. And they can cite some big numbers that boost their enthusiasm. The last fiscal year saw approximately $2.7 billion spent by production companies in Georgia. According to the governor’s office, when considering total economic impact of having the productions in the state, the number is closer to $9.5 billion. And that was before this year’s Black Panther blockbuster, which alone spent $83.9 million in Georgia.

But the criticism by many has been that the state has no systematic way to analyze the true payoff of the tax incentives. If the state is spending $200 million to $300 million a year in the form of tax incentives to the movie and TV industry, what is the “opportunity cost” of not using that money elsewhere?

Keep in mind, this is just the cost of movie and TV production; the state provides significant tax incentives to all kinds of industries for doing business in Georgia, from auto manufacturers to technology companies. Are those dollars that pay for themselves in terms of economic impact and benefits to the real Georgia economy?

Currently, Georgia is on a “naughty” list of sorts according to the Pew Charitable Trusts, for the simple reason that the state has not adopted a rigorous method of evaluating the tax incentives and measuring their true economic impact. But the good news is, that could be changing. This year, the General Assembly introduced legislation (still pending at press time) to fund a systematic analysis of tax incentives and their financial impact on the state economy.

This progress is largely due to a legislative study committee led last year by state Sen. John Albers (R-Roswell) and supported by research from the Fiscal Research Center at Georgia State University (GSU) and the Georgia Department of Revenue. The tax incentive programs provided by the state would be on a rotating schedule of review, either by an outside reviewer or by the research arm of GSU. The key is that the state commits itself to funding this analysis on an ongoing basis.

That’s a pretty big deal, because it could provide proof of the real impact of the investment in movie and TV production and give Georgia’s political and business leaders hard evidence to back their claims. It’s also the kind of data that can attract new business to the state while building a compelling case for continued investments. Amazon, are you listening?

Of course, one gets the feeling that political and business leaders will continue to advocate for these tax incentives come hell or high water – with or without this detailed fiscal analysis. For one thing, it’s good politics. But equally true, the state’s strategy is a long-term one.

The goal has been to plant the flag, to so deeply entrench the entertainment industry in the Peach State that Hollywood grows roots here. Just this year, the state extended the tax credit to post-production expenses related to TV and movie production.

Before, productions were filmed here but usually mixed and edited back in Hollywood. Using the tax credits as one enormous carrot, the state has successfully convinced production companies to build long-term infrastructure here along with new training programs for production and editing crews.

It’s pretty obvious that state leaders intend Georgia to be an entertainment-industry state. Movies and TV, along with a strong presence in music production and new enticements for the video gaming industry, are part of a long-term initiative to make Georgia a power player in entertainment. It appears the state’s strategy is working; let’s hope they soon provide the hard data to prove it to the taxpayers.

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