Georgia Lawmakers Propose Modest Changes to State Film Tax Credits

February 8, 2024   |   Tags: , , , ,
The Georgia State Capitol in Atlanta. | Sean Pavone |

After nearly two decades, Georgia lawmakers have proposed cutting back on the state's generous tax credits for film and TV productions, but the proposed cuts are much too meager to make a difference.

Georgia's entertainment tax credits have been in place since 2005. A film or TV project can qualify for a 20 percent tax credit, plus an additional 10 percent if the final product includes a "Made in Georgia" logo. A production company must spend at least $500,000 in the state to qualify. The generous subsidies led to a boom in production, leading Atlanta to become the "Hollywood of the South."

This week, Lt. Gov. Burt Jones, House Speaker Jon Burns, Senate Finance Chairman Chuck Hufstetler, and House Ways and Means Chairman Shaw Blackmon—all Republicans—announced plans to raise the minimum required investment from $500,000 to $1 million, as well as requiring more effort to qualify for the extra 10 percent. (Currently, a movie or TV show can get the extra bump just by including a peach logo in the end credits.) The announcement came nearly a year after Jones and Burns said that they would "review of all Georgia tax credits, including Georgia's film tax credit" in order to "ensur[e] a significant return on investment for Georgia's taxpayers."

Opinions are divided on the credits' effectiveness—namely, divided between the film industry and financial auditors. Last year, a study underwritten by the film industry and its advocates concluded that the tax credits had been a boon for the state's economy, boosting not just the "production sector" but "the overall climate for business development."

But auditors consistently sing a different tune. A 2020 audit by the Georgia Department of Audits and Accounts found that "the economic activity generated by the film tax credit does not generate sufficient additional revenue to offset the credit, even after considering tourism and studio construction." In 2016, for example, the state dispensed over $667 million in tax credits which "resulted in a net revenue loss to the state estimated at $602 million."

A 2023 audit by Georgia State University concluded that the tax credits cost taxpayers just over $160,000 for every job created. It calculated that the program currently spends over $1.3 billion per year with a return on investment of just 19 cents per dollar.

Based on those numbers, then, it's disappointing for lawmakers to propose such meager changes to the program.

J.C. Bradbury, an economics professor at Kennesaw State University, tweeted that changing the minimum required investment from $500,000 to $1 million would "have about as much impact on reducing the taxpayer burden of film tax credits as raising the minimum wage to $7.26/hour [from its current $7.25] would have on the labor market."

Indeed, many of the biggest beneficiaries of the tax credit—including franchises like the Avengers and Hunger Games films—cost hundreds of millions of dollars to make and earn considerably more at the box office.

Notably, most production companies are not based in Georgia and therefore pay very little in Georgia taxes. But since the credits are transferable, a company can sell its credit to an individual or business to offset state income taxes. "About 97% of the credits are sold by film companies that pay little in Georgia taxes," often at close to face value, according to The Atlanta Journal-Constitution.

"The majority portion of credits is utilized by individual taxpayers," according to the 2023 audit. "This shows that most production companies end up transferring a significant amount of the credits to individuals, rather than firms."

Blackmon suggested that under the new proposal, companies would collectively only be able to sell credits up to 2.5 percent of the previous year's state budget, which would still total just over $900 million.

"We're certainly not limiting the credit at all," Blackmon told reporters this week. That's too bad: Given that 97 percent of credits are sold, it's clear that few of the companies actually rely on them for anything other than a way to make a quick buck by fleecing Georgia taxpayers.

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