NJ's film tax credit program just isn't worth it
By: Audrey Lane
Guest columnist
Your Turn
..... Governor Phil Murphy harshly criticized his predecessor's use of tax incentives early in his first term, suggesting they were overused with questionable returns. At the time, he declared, "Tax Incentives play a role in smart economic development. But they have to be the icing on the cake, not the cake itself."
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Less than one year later, The New Jersey Film and Media Tax Credit Program was created. In subsequently expanded in 2021 as part of a $14.5 billion incentive package with the goal of accelerating the state's COVID-19 recovery by branding New Jersey the "Hollywood of the east." The program, overseen by New Jersey's Economic Development Authority, provides tax breaks to the film industry starting with 30% of production coasts outside of New York City and 35% elsewhere in the state, up to an annual limit of $430 million a year.
..... But the film tax subsidy is more glamour than substance. Garden State Initiative's new report "Is New Jersey's Film subsidy Worth it?" concludes that the film tax credit do not generate additional economic activity sufficient to cover the cost of the credits.
..... While defenders of the film tax subsidy revel in the spotlight of social media posts featuring movie stars on location in New Jersey, the fact is that this industry accounts for one-tenth of one percent of state jobs and the program cost taxpayers more than they receive in return.
..... New Jersey is not unique in offering tax breaks to Hollywood. California is home to roughly half of all jobs in the film industry. new York accounts for about a quarter of the jobs, and New Jersey, Georgia and Louisiana collectively split the last quarter of the market share. All five of these states offer tax credits - but the veneer of the shiny incentives is fading. Across the Hudson a 2024 audit of the New York Film Tax Credit revealed a "net-negative" return of 31 cents per dollar awarded to films. And in Louisiana, the continuation of film and TV production tax credit barely survived a recent vote, but the caps were reduced, lowering the cost to the public.
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Advocates of the subsidies argue that film production:
1. Necessitates the direct creation of jobs and generation of taxable activity such as wages, sales-taxable purchases, etc.
2. Will not take place in New Jersey without subsidies.
3. will spill over into greater activity elsewhere (for example: the local diner near the film set will hire more staff as a result of the increased spending by the film crew).
..... In reality, none of these claims is supported by independent economic and fiscal analysis. To date there is no evidence that the subsidies generate growth sufficient to cover their cost - if they generate any growth at all.
..... Consider that the annual value of economic activity in New Jersey total about $500 billion, while the 2023 total of wages earned by workers in film and video production in the state was just over $300 million. this data suggests that even a very large expansion of industry would have a minimal impact on the state's economy. Moreover, the claim that activity associates with film production is a net addition to the state economy is dubious, as are lasting growth effect from a larger film industry.
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In response to a recent report by the New Jersey state auditor, which raised questions about its value to the state, the EDA noted that an outside party will examine its economic impact. However, it appears that study will focus on a comparison of the industry in 2022 - an outlier year that marked a rebound after pandemic closings - with 2019, which could bias its conclusion in favor of the program.
..... In short, GSI's report reveals that there is no solid evidence to continue, much less expand, New Jersey's film and video production credit program, which commits close to 1% of the entire industry staffed with a fraction of a percent of state jobs. In other words, New Jersey deserves more cake and less icing.
..... Audrey Lane is the president of Garden State Initiative after previously serving as its policy director.