NCPA - National Center for Policy Analysis

U.S. Film Makers Want Tax Breaks

January 30, 2002

Canada provides generous subsidies and favorable currency-exchange rates to lure the U.S. film productions north of the border. But some states and the federal government are considering ways to keep production on U.S. soil through favorable tax treatment.

  • In California -- which accounts for 70 percent of movie production -- Gov. Gray Davis (D) this month proposed as much as $100 million a year in tax credits to keep television and movie projects in his state.
  • Revenue generated by film production in North Carolina -- which boasts the nation's third largest film industry -- plunged to an estimated $250 million last year from $504 million in 1993.
  • In Washington state, producers are increasingly bypassing Seattle to film in nearby Vancouver, British Columbia.
  • Chicago is reportedly losing business to Toronto and Montreal -- while Pittsburgh feels itself a victim of Toronto, also.

Many states already have incentives -- such as sales-tax exemptions and free use of public property -- in place. But in Canada, federal and provincial governments provide subsidies covering at least 22 percent of labor costs. When combined with the favorable exchange rate -- a U.S. dollar is equivalent to $1.60 Canadian -- Canada can undercut U.S. production costs by as much as 30 percent, industry officials contend.

Congress is considering legislation that would give producers a 25 percent tax credit on labor costs up to as much as $25,000 per worker on U.S.-made films. Only films with payrolls between $200,000 and $10 million would be eligible.

Source: Robert Gavin, "States Ask U.S. for Aid for Films Made in America," Wall Street Journal, January 30, 2002.


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