State film tax incentives have exploded in popularity in the last decade. In 2000, only three states offered the subsidies. By 2010, the number of states offering incentives had peaked at 40. Among these, the state government of Alaska offers one of the most generous incentive systems, say I. Harry David and Mark Robyn of the Tax Foundation.
- They receive a base rate of 30 percent of expenditures, and additional credits for spending on wages to Alaskan residents (10 percent), filming in rural locations (2 percent) and for filming in the off-season (2 percent).
- The state's Film Office is currently authorized to disburse up to $100 million between 2008 and 2013.
- As of January 13, 2012, over $14 million in credits had been issued.
- Simultaneous with this tax structure, the state's film business has boomed in recent years, rising from about $745,000 in 2010 to more than $54 million in 2012.
Recognizing these benefits on face, Alaska lawmakers have sought to expand the program to take greater advantage of the nation's film industry. Legislators recently passed a bill, waiting for the governor's approval, to renew the program to run through June 2023 and to expand many of its provisions.
Advocates of the bill make several claims about its benefits:
- Supporters assert that renewal would prevent the already-established industry from collapsing and making the film infrastructure and workers' skills worthless.
- Additionally, some point out that since several other states are scaling back their programs, Alaska can defend its industry at low cost.
- Many claim the program increases total tax revenue for the state, stimulates economic activity and creates jobs.
However, a comprehensive review of other states' programs finds that these claims are unfounded.
- Film incentives generally only serve to shift economic activity and jobs from one area to another instead of producing new ones.
- They result in a net revenue loss for states as the credits forgo more revenue than taxation on the productions brings in.
- They fail to create self-sustaining industries: production companies only remain in-state until tax conditions are made more favorable elsewhere.
Source: I. Harry David and Mark Robyn, "Movie Production Incentives in the Last Frontier," Tax Foundation, April 26, 2012.