Continual analyses indicate that these credits do not justify their price tag.
As the world wrestled with the COVID-19 crisis, Hollywood has yet to rebound fully: box office receipts and ticket sales remain short of what they were before the pandemic.
In a bid to trim expenses, film and television productions are increasingly headed overseas. Predictably, one lawmaker argues that the government should step in.
“Los Angeles has stood as the global entertainment hub for a century and still boasts an unmatched concentration of talent and infrastructure,” writes Gene Maddaus for Variety. “But in our era of globalization, with effortless international travel and communication, the city is losing some of its edge.”
While it remains closely associated with the entertainment sector, fewer projects are actually shot in Hollywood these days.
The core issue largely boils down to costs. “Everything in L.A. costs more, starting with labor due to the high living expenses and complex union contracts,” Maddaus notes. “Other states and countries have built their own crew bases, cater to producers’ needs more readily, and offer more generous incentives.”
That latter factor is what lawmakers appear eager to address.
“To safeguard this industry in America, we must be competitive with tax credits,” Sen. Adam Schiff (D–Calif.) told Variety. Schiff advocates for a federal film production tax credit; he said in March he had “largely drafted” legislation but would need cross-party support.
Last year, when President Donald Trump pledged to impose a 100 percent tariff on films “produced in Foreign Lands,” Schiff countered that the solution should be a bipartisan, globally competitive federal incentive to bring back production and jobs.
But simply introducing a new U.S. film-production tax credit would not solve the issue. In fact, it could spawn new complications.
More than half of American states and territories currently offer film and television incentives.
Georgia’s program, launched in 2005, allows any studio spending at least $500,000 in-state on filming to claim a tax credit worth up to 30 percent of its total in-state production costs.
Since then, states have continued to compete, racing to the bottom to offer the most generous incentives at the expense of taxpayers.
That trend includes California: “[Gov. Gavin] Newsom doubled the state program to $750 million in 2025,” Maddaus observes. “Everybody seems to agree it should be larger—perhaps substantially—and that it should cover above-the-line salaries for performers, writers, and producers.”
“Even Massachusetts has more favorable tax credits than Hollywood,” commented reality star Spencer Pratt, who recently failed in his bid to become Los Angeles mayor. In 2021, Massachusetts helped fund as much as 60 percent of the production budget for Don’t Look Up, a satirical climate-change film that premiered on Netflix after a brief theatrical run.
As mayor, Pratt vowed to pursue “uncapped” production tax credits, which would allow the state to spend unlimitedly on incentives. Yet such a policy isn’t a cure-all; Georgia’s program is uncapped, but Marvel Studios still moved the production of its newer Spider-Man and Avengers films to the United Kingdom, where labor and production costs are lower.
Marvel isn’t alone. “Now, millions of square feet of production facilities sit idle,” The Wall Street Journal reported in January, highlighting Georgia’s current film-industry state. “Bribing studios with taxpayer money isn’t a route to a thriving industry—it’s a path to being out-bribed.”
Moreover, studies consistently show that incentives for production aren’t cost-effective.
“Film Tax Incentives Are a Giant Waste of Money,” announced a 2016 Variety piece by Maddaus—the same author who this week revisits lawmakers’ efforts to pour more money into them. That research found little or no growth in film-industry jobs in states that adopted production incentives.
“Consistent with analyses of other states’ film tax-credit programs, the State of Georgia loses money,” according to a 2023 audit by Georgia State University. “We estimate a state fiscal return on investment of 0.19 for FY 2024, meaning an 81 percent loss.”
Additionally, only a small fraction of credits actually benefited their intended recipients. Studios typically owe little in state taxes, but Georgia’s law allows unused credits to be sold to other taxpayers, so studios collect the sale proceeds while the state misses out on revenue. “Approximately 97% of credits generated in tax year 2016 were transferred to another taxpayer (e.g., sold), while less than 1% of credits were used by the production companies against their own income tax liability or employee-withholding taxes,” according to a 2022 report from the Georgia Department of Audits and Accounts.
A 2017 report concluded that Virginia’s tax credit “has little effect on film-location decisions, provides negligible benefits to the Virginia economy, and yields a negligible return on the state’s investment.”
Rather than creating jobs, the credits function as subsidies for the wealthy. The 2023 audit found that Georgia’s incentives cost the state “$160,009 for every net job” they purportedly produce. In 2015, Massachusetts concluded that its credit costs taxpayers $118,000 per job.
The plain fact remains that Hollywood studios, like any major corporation, will relocate wherever their money goes the farthest. Free state money helps, but it isn’t enough to overcome cheaper overall costs elsewhere.
The most sensible path would be a joint pledge to dismantle these incentives—states simply scrapping production incentives altogether. If that isn’t feasible, at the very least we should stop repeatedly throwing public money after a failing policy.
