New Jersey Governor Chris Christie's decision this week to reject tax credits for MTV's "Jersey Shore" reality show was mostly a judgment on Snooki and the Situation. The governor said in a letter announcing the move that he was "duty-bound to ensure that taxpayers are not footing a $420,000 bill for a project which does nothing more than perpetuate misconceptions about the State and its citizens." Christie's move, though, also was the latest judgment against film tax credits themselves.
At Christie's urging, New Jersey's budget last year suspended the state's program, which had offered films and T.V. shows a tax credit worth 20 percent of their expenses. The state still provides incentives to companies that qualified previously, which is why it took Christie's separate action to deny Jersey Shore the credits.
New Jersey isn't the only place where lawmakers have become skeptical of whether the economic benefits of film tax credits are worth their costs to state budgets. The Tax Foundation reported in June that seven states in addition to New Jersey have ended or defunded their film tax credit programs recently: Arizona, Arkansas, Idaho, Iowa, Kansas, Maine and Washington. Plus, other states, such as Michigan and New Mexico, limited film incentives this year. Even in the movie capital of California, lawmakers approved only a one-year extension of their film tax credit, when the industry had been asking for a five-year extension.
The turn against film tax credits represents a major reversal from earlier in the decade, when states ramped up competition for films with generous tax credits. According to the Tax Foundation, only four states offered them in 2001. By 2009, the number was up to 40. In many cases, in fact, the credits have been larger than the tax liability films faced, but were refundable (meaning the film companies could take them as cash after their taxes were paid off) or transferable (meaning they could sell the credits to other taxpayers). For example, the Massachusetts Department of Revenue reported in January that of the $260 million in tax credits that state had handed out since 2006, $216 million of them had been sold by the film companies.
The case for this generosity is that movies and T.V. shows are unusually mobile, meaning that they represent a promising opportunity for states to lure jobs and economic activity they wouldn't otherwise get. Although it's hard to imagine that the first season of Jersey Shore could have been filmed in Ohio or New Mexico, many movies and T.V. shows could be filmed practically anywhere, making incentives a key factor in location decisions. That's evident in the incredible growth in the film industry in states that have offered incentives-in Michigan, supporters say , the industry went from a $2 million business to $225 million in two years. But this mobility is also part of the arguments against the credits: Critics say that films offer mostly temporary jobs, with many of the benefits going to people from out-of-state.
Despite the setbacks for film tax credits over the past two years, the majority of states still offer them. Nor are they necessarily dead for good in New Jersey. Just Monday, despite the Jersey Shore controversy, the New Jersey Senate voted to restart and expand the film tax credit with an annual cap of $50 million a year. Christie, though, is expected to oppose that bill, the Philadelphia Inquirer