MPAA Chafed by USC Studies Critical of Film and TV Tax Incentives

Former Senetor Chris Dodd-Holy Trinity Catholic Church Washington DC-2011
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The studies concluded that tax incentive programs that favor the entertainment industry aren't worth the lost revenues to states.

Hollywood's lobbying arm is less than pleased with the results of two recent USC studies that find that state tax incentives for film and television productions have "no effect" on employment numbers, wage growth or the overall health of a state's economy.

The Motion Picture Association of America released a strongly worded statement Wednesday calling the results of the studies into question, a rejoinder that comes as little surprise to tax analysts, who regard them as a powerful challenge to programs that have been adopted in as many as 40 states over the last decade.

"The USC studies are incredibly damaging to the message that the film industry has been putting out there successfully for a long time," Joe Henchman, an analyst at the Tax Foundation, a think tank in Washington, tells The Hollywood Reporter. "These are solid studies."

MPAA researcher Julia Jenks, in a post Wednesday on the MPAA's website, took issue with the quality of the data used in one of the studies, titled "Lights, Camera, but No Action?" and authored by Michael Thom, an assistant professor at the Sol Price School of Public Policy at USC. It also dismissed the analysis, which Jenks says "ignores the fact that different size incentive programs may have more or less impact."

"This is just wrong," Henchman says of the latter criticism. "The studies took California and New York, the states with the largest programs, out of the mix, and got the exact same results. They specifically controlled for size."

Some analysts do agree with the MPAA, however, that the data provided by the Bureau of Economic Analysis used by the USC study lumped too many employment categories in together.

"They do have a point about including exhibition and theater workers alongside other workers on a production," says Norton Francis, a researcher at the Urban Institute, another Washington think tank. "That's a different dynamic."

The MPAA post also calls it "implausible" that "transferable and refundable tax credits [should] have different impacts on employment," a criticism that left several analysts scratching their heads.

In fact, the film industry's transferable tax credits, which can be sold on secondary markets, have invigorated an entire cottage brokerage industry, which even launched its own version of eBay in 2013. Refundable tax credits, on the other hand, are simply administered by cutting productions a check.

The MPAA rebuttal links to research that the organization itself paid for, research that supports "key policy goals on behalf of the Motional Picture Association of America."

"This is an interest group," USC's Michael Thom tells THR. "They have every incentive to make these subsidies look like they're working."