Is Hollywood’s impact on Georgia’s economy just more make-believe?
Published 3:02 pm Friday, August 23, 2019
Hollywood is the land of make-believe and nowhere is that make-believe more evident than in the film industry’s alleged impact on Georgia’s economy. That’s according to Dr. J.C. Bradbury, professor of economics at Kennesaw State University.
After the General Assembly passed and Gov. Brian Kemp signed into law a measure banning abortions if a fetal heartbeat can be detected, cries of righteous indignation arose from the land of fruits and nuts. Now, the entertainment industry is threatening to boycott the state, overly generous film credits notwithstanding. And a lot of people are wringing their hands in despair.
The Georgia Department of Economic Development claims that the film industry had a $9.5 billion impact on the state’s economy in 2018 and the Motion Picture Association of America says the industry is responsible for more than 92,000 jobs in Georgia. Really?
Not even close, Dr. Bradbury says. He has issued a report entitled “The rapid widespread propagation of specious information regarding Georgia’s film industry.” That is economist-speak for saying that Hollywood’s numbers are as inflated as Sean Penn’s ego.
His analysis says Georgia’s film industry contributes approximately $3 billion to Georgia’s $588 billion GDP, which is approximately 0.5 percent or 1/200th of the state’s economy, “a rather small part of our economy.”
As for the claim that the industry employs 92,000 workers in the state, Bradbury says that’s just more Hollywood make-believe. Data from the Bureau of Labor Statistics puts that number at 14,250 full- and part-time jobs. The Georgia Office of Planning and Budget reports the number of film days worked translates to some 16,800 full-time equivalent jobs. The economist says he considers these to be two more reputable sources than an industry advocacy group and splits the difference on the high side at 16,000. Either way, he says, it’s not 92,000.
So, where does Hollywood get its numbers? Bradbury says, “It is based on a multiplier of 3.57, which lacks any economic justification. Nobody seems to know where the numbers come from, but they keep getting reported by the Department of Economic Development as fact.”
In an article in the Atlanta Newspapers in 2015, Lee Thomas, Deputy Commissioner of the Georgia Film, Music and Digital Entertainment Office, acknowledged that “the state doesn’t know what sorts of spending that multiplier originally counted, or why the 3.57 estimate was used.” They just continue to multiple direct spending by 3.57. Bradbury says that is proof that the multiplier “is not grounded in any economic reasoning” and calls it “irresponsible.”
A 2017 report from Pew Charitable Trust, “How States Are Improving Tax Incentives for Jobs and Growth,” notes that Georgia lacks a process for evaluating its film tax credits program, and that despite providing billions of dollars in tax credits “the state has not rigorously studied the results of the program.”
That hasn’t stopped Georgia from pouring out incentives to get Hollywood here — currently a tax credit of 20 percent of qualified in-state expenditures, with an additional 10 percent for including a promotional logo.
The state has approved more than $4 billion in tax credits over the past decade, which Bradbury says is a substantial transfer of resources from Georgia taxpayers in terms of fewer government services or private spending. Last year, that number amounted to $800 million. That represents approximately 3% of the state-funded budget or $220 per Georgia household.
Here is the kicker: If the recipients don’t use up the amount of tax credits they are granted, the money does not come back to the state coffers. Instead, the credits are transferable.
For example, an entity owing the state $1 million in taxes could purchase that amount in tax credits from a film production company through an intermediary for around $900,000. The buyer purchasing the credits then submits the tax credits to the treasury rather than making a tax payment. And We the Unwashed are out a million tax dollars. If Gov. Kemp is looking for additional tax revenues, I can suggest a good place to start.
I will spare you a lot of charts and graphs and economist jargon, but I suggest you contact Dr. Bradbury at email@example.com and see his analysis for yourself. Then make up your own mind.
As for me, I would say to all the chest-thumping make-believers threatening us with a boycott: If you don’t like the way we do things in Georgia, don’t let the door hit you on the way out of town. And leave your tax credits here.