(The Center Square) — Pennsylvania’s investment in film tax credits hasn’t delivered the economic returns policymakers had anticipated, according to a recent analysis.
In its five-year review, the Independent Fiscal Office said the program’s $8.5 million net tax revenue does accomplish its legislative intent, even if tens of thousands of dollars in potential profit seep out of the state in the meantime.
That’s because 95% of tax credits are transferred or sold, rather than used by their recipients. Those credits are usually sold at 93 cents to 94 cents on the dollar, reflecting a leakage of 6%-7%.
Sales of film tax credits aren’t new, either. State legislators have introduced bills to ban the resale of them, as The Center Square previously reported.
In 2019, the tax credit program cap increased from $65 million to $70 million, and again in 2022 to $100 million (less than a proposal that aimed to boost it to $125 million). However, other states like California ($330 million) and Georgia ($533 million) give significantly more credits, making it harder for Pennsylvania to compete.
Unless Pennsylvania increases the tax credit “by a substantial amount,” production firms will not relocate from other states “where they’ve already invested significant resources and established a long-term presence,” according to the IFO.
The office concedes its difficult to measure the impact through available government data, noting that although the tax credit retains jobs, “it is likely insufficient to expand the industry due to competition from other states and the transient nature of annual production activity.”
A significant amount of tax credit spending — 40% by the IFO’s analysis — leaves Pennsylvania for costs like actor salaries.
“The results of the review are unclear; the credit is large enough to attract significant economic activity and productions, but too small to attract large feature films and longer-term investments,” the IFO noted.
Some states like Michigan have abolished their film tax credit program, while critics argue that these programs struggle with transparency and creating long-term economic growth.
