What Would a Federal Tax Incentive Really Offer Economically?
With talk of a federal tax incentive for filming in the US taking serious shape at present, a new, MPA-commissioned study offers insight into what such a program could really offer. Blake & Wang P.A. entertainment attorney , Brandon Blake, shares the topline insights you should know.
An Extra $125B in Production Spend
The MPA study suggests that production spending between 2027 and 2035 could see a $125.3B uptick should a federal film tax incentive program be implemented. It also suggests that there could be around $250B in overall economic activity added in addition to direct improvements. Additionally, up to 143,500 full-time jobs could be created. Altogether, this would raise the US’s share of filming globally to around 65% across feature films and TV projects.
That’s a lot of exciting numbers. At a time when the momentum for the President’s suggested federal tax incentive seems determined to see it through to the end, complete with the bipartisan backing of lawmakers, the MPA data offers further backing and enthusiasm. Perhaps we even have enough energy brewing to see this one through to the finish line.
The Flip Side of the Coin
However, enthusiasm is one thing. Another critical question is, what happens if we don’t establish a federal-level incentive program? The MPA’s commissioned study gives some further insight into that question, too.
Their data suggests that, if incentives remain at the state level only, the only boost we would see to overall production spending would lie in inflation over time. The actual power of that spending would remain relatively flat, if not in active decline. Currently, the US drives about 34% of all feature film projects and 42% of TV projects globally. Without the projected impact of a federal-level incentive, that is projected to decline to 25% and 29%, respectively.
Of course, since we do not yet have a formal bill on exactly what a federal tax incentive would look like, there are some assumptions in play here. However, these projections include a transferable tax credit of at least 20%, which is reasonable, with a possible 5% for indies and labor costs in FEMA disaster areas. It also, of course, assumes global production spend will increase at a rate around 3.7% annually, so it wouldn’t account for another COVID hiding in the wings, for example. Probably the most critical assumption, however, is that an incentive would be stackable with what states already offer, but this is a model already in play internationally.
What it does make clear, however, is that without some way for the US to keep pace with expanding global initiatives, it will steadily lose competitiveness with other nations. We’re already seeing the country lose ground to alternate international destinations, like Canada and the UK, due to better tax advantages. A federal tax credit would be a good way to even that playing field and re-encourage productions to consider the US as a destination. At the end of the day, that’s what the domestic industry needs the most.
