IBJOpinion

Hicks: Subsidizing filmmaking is a losing proposition

Mike Hicks
June 14, 2014
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Mike Hicks

If you are fortunate enough to share the same household as an excogitative, romantic teenager, you are aware that John Green’s novel “The Fault in our Stars” is now a very popular movie. I am thusly blessed, but decided to skip the movie this weekend. I doubt any movie can match the wondrous beauty of Green’s prose, and I am sidetracked thinking about the economic development issues surrounding the movie.

Green’s novel takes place in Indianapolis, but the movie was made in Pittsburgh. Parts of the city were transformed into Indy landscapes at great costs and the stars wore Pacers and Butler Bulldog shirts. The economic policy consideration centers on why the movie was not made in Indiana.

The movie industry in the United States is heavily subsidized by state and local governments. Indiana does not have a movie-specific tax incentive, but Pennsylvania does. In fact, nationwide, annual payments to the movie industry probably number in the several billion dollars, with movie-specific tax credits coming close to $2 billion. This raises the types of serious questions that rarely make it into the tax incentive debate.

Having artists and artistic activity in our midst is an important part of a vibrant regional economy. As we become a more affluent nation, we spend more of our income on such things and choose where we live partly based on the abundance of such offerings. Regions without serious cultural attractions will be left behind, but that is not sufficient argument for instituting tax incentives.

Much economic activity can be motivated to relocate through government subsidies.

Movies are especially footloose activities for which tax abatement or direct subsidy will often make the difference between filming locations. Advocates of these types of subsidies make the same mistake many economic developers are inclined to. They focus too much on simply getting the deal, and too little on whether the entirety of the deal is good for the region.

Without even touching upon the fairness of Indiana taxpayers subsidizing Hollywood studios, film tax credits are of dubious value. The jobs they generate are transient, often low-paying and unlikely to meet the simplest benefit-cost calculus. The best argument is that the movie might highlight the region, and that is a costly argument.

We should be open to a broader discussion on film tax credits, but we must ask some tough questions. If we don’t, Hoosiers risk being swindled and the fault will be not in our stars, but in ourselves.•

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Hicks is director of the Center for Business and Economic Research and a professor of economics at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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  1. How much you wanna bet, that 70% of the jobs created there (after construction) are minimum wage? And Harvey is correct, the vast majority of residents in this project will drive to their jobs, and to think otherwise, is like Harvey says, a pipe dream. Someone working at a restaurant or retail store will not be able to afford living there. What ever happened to people who wanted to build buildings, paying for it themselves? Not a fan of these tax deals.

  2. Uh, no GeorgeP. The project is supposed to bring on 1,000 jobs and those people along with the people that will be living in the new residential will be driving to their jobs. The walkable stuff is a pipe dream. Besides, walkable is defined as having all daily necessities within 1/2 mile. That's not the case here. Never will be.

  3. Brad is on to something there. The merger of the Formula E and IndyCar Series would give IndyCar access to International markets and Formula E access the Indianapolis 500, not to mention some other events in the USA. Maybe after 2016 but before the new Dallara is rolled out for 2018. This give IndyCar two more seasons to run the DW12 and Formula E to get charged up, pun intended. Then shock the racing world, pun intended, but making the 101st Indianapolis 500 a stellar, groundbreaking event: The first all-electric Indy 500, and use that platform to promote the future of the sport.

  4. No, HarveyF, the exact opposite. Greater density and closeness to retail and everyday necessities reduces traffic. When one has to drive miles for necessities, all those cars are on the roads for many miles. When reasonable density is built, low rise in this case, in the middle of a thriving retail area, one has to drive far less, actually reducing the number of cars on the road.

  5. The Indy Star announced today the appointment of a new Beverage Reporter! So instead of insightful reports on Indy pro sports and Indiana college teams, you now get to read stories about the 432nd new brewery open or some obscure Hoosier winery winning a county fair blue ribbon. Yep, that's the coverage we Star readers crave. Not.

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