Stop Pinnell Before He 'Shoots' Again

This summer, Oklahoma Lt. Gov. Matt Pinnell announced that “he” had turned down $80 million worth of television and movie production in Oklahoma due to “the tight cap on the state’s film incentive program.” Oklahomans should be thankful the cap is there to keep us from wasting Oklahomans’ hard-earned tax dollars. Film incentives have long been recognized as wasteful spending that generates little or no benefit in this or any state.

Film incentives use state funds to pay a share of qualifying spending on film-making and related activities in the state, generally giving preference for using residents and businesses. Film incentive boosters like Pinnell claim 1. they bring in outside spending and support temporary jobs during filming, and 2. they jump-start a local film industry with permanent employees and production capability.

In both cases, boosters insist this spending will multiply through the economy and generate tax revenue that pays back the incentives.

Oklahoma’s incentive program has been in place since 2001, with the limit on total available credits set at $5 million but since increased to $8 million and then to $30 million. Oklahoma gives rebates for 20% of salaries paid to non-residents and 30% for resident pay, plus additional bonuses for using more local suppliers.

Since adopting the incentive Oklahoma has hosted productions, but their impact has been small in comparison to our economy. According to the state’s Incentive Evaluation Commission [IEC], Oklahoma paid out $27 million in rebates from 2011-19, the most recent year reported. These productions have spent $106 million in the state, including $36 million for payroll. The average annual spending of $11.7 million amounts to one-hundredth of 1% of Oklahoma’s economy in those years.

Put another way, a year’s film production generates the same amount of economic activity that Oklahoma generates every 34 minutes.

As to the tax impact? The IEC estimates that we’ve collected an average of 28 cents in taxes for every $1 spent on rebates, counting a substantial “multiplier effect.” That’s not a 28% return, it’s minus 72% return.

But what about the long-term jobs as the industry takes hold in Oklahoma?

While there has been some growth in permanent film and television jobs in Oklahoma, its economic impact is equally small. The IEC says that total employment grew from 161 in 2005 to 306 in 2019.

Assuming, probably too generously, that all 145 new jobs resulted from incentives, we’re getting one new permanent job for every $190,000 we spend on rebates. That’s typical of what other states have experienced.

But wait, there’s more! Even these horrible results – a negative 72% percent return on our tax investment and nearly $200,000 to “create” each job – are vastly overstated.

The money for rebates doesn’t come from nowhere. It comes at the expense of public services, or tax cuts for actual Oklahomans.

If we’d hung on to our $27 million it would have circulated through the state, maybe as teacher salaries, maybe as tax cuts, and it would have the same “multiplier effect” as film-making or any other activity.

The IEC also doesn’t consider that some of the productions would be made in Oklahoma without the incentives [because Oklahoma is essential to the story, or because producers are Oklahoma-based]. Some of the incentives are thus paying people to do what they would do anyway. That makes the return less than zero, since we’re giving up public services to pay them.

Experience in Oklahoma and across the nation has shown that the economic impacts of incentives are hugely overstated. Massachusetts spent $110,000 for each permanent job in the industry, while North Carolina spent about $500,000 per job.

A 2013 study found that every dollar spent on a film tax credit returns 27 cents in economic activity. That’s a lot less than if the state held on to its tax dollars and used them for schools, infrastructure, or public safety!

A more recent 2018 study of 44 states showed that incentives had no significant impacts on film industry growth, on overall economic growth, or on residents’ income. The minor impacts they could measure were negative: film incentives may slightly shrink our economy and our income!

Even in Georgia, where the most generous and expensive incentives have made Atlanta a production hub, the state gets back just a dime in tax revenue for every dollar it spends.

But what if Matt could spend $80 million more? Wouldn’t that make us the new Hollywood [or at least Atlanta]? Not unless you dismiss all the evidence gathered over the last two decades, across the nation and in Oklahoma.

It would mean $50 million less in essential public services like education, transportation, and childcare, for example, all of which generate greater economic and social benefits than we’d get from a film industry of any size.

Realistically, we won’t eliminate this wasteful government spending. The industry lobbies relentlessly and shamelessly overstates its economic impacts, and famous people are like catnip to politicians. But we don’t have to double down on it and we can work over time to limit the damage by returning to a lower limit and reducing the share the state is willing to pay.

So, Lt. Gov. Pinnell, please try to get by on the generous incentives you have to work with already. As a consolation, I’ll take you to see Barbie. You might learn something!