A study done at UCLA supports the notion that film tax credits support overall state revenues, just not as much as they once thought. Before the study, Los Angeles County Economic Development Corp. (LAEDC) believed that film tax credits multiplied revenue 13%, or returned $1.13 for every dollar invested in the tax subsidy. Recently, that perception has changed with the UCLA study finding that the multiplier is closer to 4%, or returning $1.04 per dollar invested. However, it should not change anyone’s mind about the policy’s efficacy. Because the study showed even if the tax subsidy was not offered, people were still willing to produce their television or film project in California.
As reported by the L.A. Times, one research director iterated the importance of the tax credit, how it provides long-term benefits for the state of California. If anything, the UCLA study may have lessened the perceived importance of the tax subsidy. Yet, overall it’s still clearly a monetary benefit for state revenues, not to mention non-pecuniary benefits that are harder to measure.
The tax subsidy is $100M total, and credits are able to be sold to third parties. One of the authors of the study mentioned selling credits should not be allowed. He also supports the policy of doubling the tax subsidy to $200M total.
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