Our Take on the Film Industry’s Subsidies

This evening, at 4pm, the Rio Grande Foundation is co-hosting a debate on the film industry’s subsidies with the newly-formed New Mexico Motion Picture Association. While the debate will involve four legislators, I felt that it was important for us to put out our own statement explaining our concerns about the program. That statement follows:

New Mexico’s film industry is heavily-subsidized. Filmmakers are reimbursed for 25% of everything they spend in the state to make a movie (not including the interest free loans and job training considerations which are not discussed here in detail). This is a very generous program that has undoubtedly led to a large number of films having come to the state. Of course, this program is also direct expenditure of taxpayer dollars collected by the state. This money was taken from average citizens and other businessmen in the form of taxes and transferred to a chosen industry (the film industry).

Simply put, this violates the basic principle of tax fairness and this is grounds for our opposition.

But what about the program’s effectiveness? Advocates claim that millions of dollars in economic activity and thousands of high-paying jobs have been produced by the program. A variety of other studies including non-ideological ones from the Arrowhead Center at NMSU, the liberal Center on Budget and Policy Priorities, and the conservative Heartland Institute (to name just one conservative critique) have pointed out the flawed economic logic associated with New Mexico’s film subsidy program and similar programs nationwide.

Some 44 states nationwide offer film subsidy programs of one type or another. So, why does the Rio Grande Foundation believe that it is right and that policymakers in 44 states are wrong?

First and foremost, what we have here is a classic case of concentrated benefits and designed costs. The film industry and its employees derive significant benefits from the diversion of $60 to $90 million annually to their industry. They have a tremendous amount at stake when it comes to preserving and continuing the subsidies.

Other businesses and average taxpayers do not see how much is being taken from them to fund this program. All they hear about is the films that are made here, not what they could have done or businesses could have done with the money – including hiring New Mexico workers – if they’d had the opportunity to keep their money.

Currently, the state faces a $400 million budget deficit. Even if we wished to keep subsidizing the movie industry to the tune of $60-$80 million annually, can we afford it? If we are to continue the subsidy, what areas of program should be cut? Should K-12 education be reduced or Medicaid? How about higher education? These are problems that advocates for the film industry rarely address.

Another anti-subsidy perspective outlining corruption concerns over the internal workings of the program and analyses of the program were discussed recently in the Albuquerque Journal by Rep. Kintigh.

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2 Replies to “Our Take on the Film Industry’s Subsidies”

  1. Hmm. If a 25% tax reduction can generate a billion dollars from films like Egolf claims, why not eliminate all subsidies and then cut taxes by 25% across the board? How many billions of economic acitivity could be generated in all sectors?

  2. If New Mexico had a strong private sector, entrepreneurship culture and educated labor force, maximizing the dollars plowed back into the private sector would make sense. Without these factors, the film industry is a bird in hand that is unlikely to be replaced if it flies away. I see no evidence that employers are lining up to employ graduates of our failing schools and place themselves at the mercy of our unelected, banana-republic regulators.

    The objective here should be to determine what kind of subsidy is required to keep New Mexico competitive, and fine-tune our incentives to continue to attract this business without giving away the store — while continuing long-term efforts to build a more fertile business climate.

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