N.C. can stand on principal, or it can be in movies
Providing tax incentives to lure business is like any other loophole in the tax code. Ideally, you wouldn’t do it – no one would. Everyone would play by the same rules and make their decisions based on every other factor, not on taxes.
But the playing field is not level. In any area of business, some cities and states are willing, even eager, to cut deals.
North Carolina used to strongly resist offering incentives. That changed over the years as business after business went to states that were willing to throw money at them. Incentives now have become somewhat commonplace without a huge amount of objection, up to a point, as long as they are luring permanent businesses.
But there is a debate now at the state level over whether North Carolina ought to be paying incentives to movies and TV productions.
The state spent $60.5 million on such incentives last year and is still processing claims that totaled $69.5 million, the Raleigh News & Observer reported earlier this month. Productions included the movies “Iron Man 3,” “Safe Haven,” “The Conjuring” and “We’re the Millers,” and TV shows “revolution,” “Under the Dome” and “Eastbound & Down.”
But that incentives program is set to expire at the end of 2014.
The Motion Picture Association of America says tax incentives are important because they allow long-term planning for productions and could tip the balance between profit or loss and success or failure.
In many cases they probably do.
But “Iron Man 3,” which received $20 million in state tax incentives? Did the studio really expect that incentives were going to tip the balance for that? Or was it sticking its hand out because it knew North Carolina – or any other state it approached – would simply love to have its name attached to that production?
So far “Iron Man 3” has made more than $408 million just in the U.S.
If North Carolina didn’t offer movie incentives, the studio might have come anyway.
Or maybe this state didn’t have anything that the producers couldn’t have found somewhere else, and the movie might have gone to someplace such as Georgia. Rep. Ron Stephens of Savannah, a Republican who is the chairman of Economic and Tourism Committee in the Georgia House of Representatives, is an avid fan of paying incentives to lure movies. He brags that seven years ago the filming industry was generating about a $200 million economic impact in the state, and last fiscal year that grew to more than $3 billion.
If Georgia is dead set to make itself the Southern vacation home of Hollywood, perhaps North Carolina could just let it suck up more of the business. What would we really lose?
In April, a report analyzing the impact of “Iron Man 3” in North Carolina showed that the movie was responsible for $179.8 million in spending and 2,043 jobs in the state during 2012 and $104.1 million in labor income, and that spending associated with the film engaged 719 vendors in 84 communities. This allegedly breaks down to $8.99 in economic output, and 102 jobs, for every dollar of tax credit received by the production.
Even if those numbers are inflated, there’s little doubt that production of the movie resulted in a great deal more spending in North Carolina than $20 million, so there’s an argument to be made that incentives for filming is money well spent.
The counter argument is one of standing firm on principal, that it simply is wrong to offer what some would call a handout to a business that can and should stand on its own and compete in the market.
Standing on principal when all around you are compromising can feel good. It’s just not going to bring Robert Downey Jr. and Gwyneth Paltrow to town, not when Georgia and others are offering to turn down their beds and tuck them in at night.