Film Subsidies: Stimulus or Crutch?

Peter Leitch, Jordan Bateman | BCBusiness
Peter Leitch (left) and Jordan Bateman (right) debate the value of film subsidies.

To industry supporters, tax incentives build industries and create jobs. To critics, governments have no business picking winners and propping up businesses. Offering contrasting perspectives are Peter Leitch and Jordan Bateman

Peter Leitch’s FOR Argument
Chair of Motion Picture Production Industry Association of B.C.

Tax credits are widely used by governments to stimulate economic growth, attract inward investment, create jobs and diversify the economic mix. In B.C.—along with film and TV production—mining, logging, small business and book publishing are among the business sectors with tax incentive programs. [1]

Film and television tax credits have proven successful the world over, making screen entertainment production a truly global enterprise. Today, tax credits are a competitive imperative for markets wishing to capture and build this business. They are in effect in most provinces across Canada, in more than 30 U.S. states and 20 countries. [2]

In B.C., industry tax credits have helped build the province into a leading centre for production known worldwide for excellence. Over the past decade alone, the production sector contributed a billion dollars annually to the B.C. economy not including ancillary economic spinoffs. Motion-picture production offers quality employment and good returns; it’s easy on the environment and an industry in which B.C. excels. [3] With B.C.’s economy largely dependent upon natural resources, it makes sense to invest in knowledge-driven industries—for a more diversified economy that will create new opportunities for generations to come.

Jordan Bateman’s Rebuttal

1. Great point. We should get rid of all of these subsidies. Government shouldn’t be picking industry winners and losers with our money—they should be providing critical infrastructure.
2. Actually, they haven’t been successful. That’s why so many states and provinces are scrapping them. They have learned: you can’t keep giving away free stuff or money. It’s not sustainable.
3. So when does that expertise become the draw, not free money? Disney turned a $1.4 billion profit last year, yet the industry expects B.C. taxpayers to increase subsidies to Once Upon A Time and other productions. It’s bad economic policy.

Jordan Bateman’s AGAINST Argument
B.C. Director of Canadian Taxpayers Federation

As Bill Clinton said, “It’s arithmetic.” And the arithmetic of taxpayers subsidizing the film industry is failing. B.C. taxpayers lose money on film. In 2012, we spent $437 million on film subsidies, six times as much as in 2005, but virtually the same amount of production happened in B.C.—$1.2 billion. With every conceivable tax spinoff counted, B.C.’s treasury likely lost $220 million or more—money that should have gone to education, health care or tax cuts. [1]

B.C. isn’t alone in being hoodwinked by Hollywood. Ontario subsidized its $1.3 billion industry with $290 million, and it’s unlikely they made back enough tax revenue to cover that cost. Louisiana’s chief economist reports that a dollar in film tax credits returned only 15 cents to his state’s treasury—a loss of 85 cents. Michigan taxpayers got 11 cents back—a loss of 89 cents. The math is scary: B.C.’s $437-million 2012 subsidy is one-third as much as the $1.3 billion the 37 states who offer credits put in combined. [2]

Saskatchewan, Washington, Arizona, New Jersey and Maine are among several jurisdictions cutting film subsidies. B.C. should join that trend. B.C.’s film workers are real people, with real families, worried about making real paycheques. They have become victims of bad arithmetic, but it shouldn’t be up to taxpayers to save B.C. film. [3]

Peter Leitch’s Rebuttal

1. According to the Ministry of Finance, film production has contributed $11.3 billion to the B.C. economy in the last 10 years and paid out $1.3 billion—a very decent ROI.
2. $437 million is not an average annual cost of tax credits in B.C. (about $200 million a year over three years to March 2012). And unlike industry subsidies, B.C. film tax credits are rebates on B.C. labour-based production costs—tied directly and only to B.C. jobs after they’ve been incurred.
3. Tax credits helped build B.C. into one of the most robust production markets in North America, creating thousands of jobs and attracting leading companies. B.C. needs this kind of economic development.