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Multiplier Effect of Movies?

The favorite phrase of a Keynesian economist is “multiplier effect,” as they believe their “enlightened” guidance leads the masses to prosperity.  The central tenant of Keynesian economic theory is, of course, that the government is better capable to stimulate economic growth & expansion than everyday folks.  The Keynesian will favor higher taxes and more government spending, as opposed to lower taxes and lower government spending.  The SC Legislature’s providing of film incentives for movies made in the State certainly wins high marks for its Keynesian credentials.

In an effort to stimulate tourism and job creation in the Palmetto State, the government has decided to throw cash at Paramount…and every other film production company seeking to operate in the State.  At first blush giving tax credits to film movies in South Carolina doesn’t sound like such a bad idea; however, upon close examination, we’re losing far more money on these “stimulus” packages than we’re taking in.  That’s sort of expected when it comes to economic planning models where folks like Senators Hugh Leatherman and Glenn McConnell are at the helm.

Let’s take look at some of the incentives offered by the SC Legislature to film companies operating in the State:

  1. A 20% rebate (refunded from taxpayer pockets) on total payroll costs for the film.
  2. A 30% rebate (refunded from taxpayer pockets) on all non-payroll costs (meaning everything else spent on the production in SC).
  3. Additional marketing funding provided by the State of South Carolina (to promote the film.

And these are just the refundable items, which are piled on top of massive tax credits and exemptions that no other business in the State would ever dream of receiving.  The incentives offered movie companies in SC are so expansive that a College of Charleston economist determined that the average return on our investment is $0.19 on the $1.00.  That’s to say that for every $1 dollar spent by the state government in support on film production in SC, the taxpayers receive 19 cents in return.  What a bargain!  We only gave away 80% in free money.

These failed attempts of the state government to centrally manage our state’s economy would be laughable, if they weren’t so expensive.

The only state to spend more on movie incentives…Michigan, and we’ve all seen how great central planning has worked-out for those folks.

 

Filed in: State Economy, Targeted Incentives

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