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Audit: Georgia’s film tax credit doesn’t result in huge return for taxpayers

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(The Center Square) — While Georgia’s vaunted film tax credit helps create thousands of jobs in the state, it results in a small return on investment for taxpayers.

A new audit requested by the Senate Finance Committee and produced by the Georgia State University Fiscal Research Center estimated that claimed credits could increase from $762.8 million in fiscal 2024 to nearly $1.3 billion in fiscal 2028. For fiscal 2024, the resulting economic activity would bring in an estimated $224.7 million in state revenue and $65.7 million in local tax revenue.

The film tax credit likely resulted in roughly 37,000 jobs in 2022 and much of the film-related activity in Georgia results from the credit. However, the audit calculated a state fiscal return on investment of 0.19 for fiscal 2024 — a loss of 81% — “using the estimates generated from the representative year of 2022 and using credits generated of $1.35 billion.”

“The Georgia FTC induces substantial economic activity in Georgia,” the audit concluded. “It is also the largest tax expenditure among Georgia’s economic development incentives. Consistent with studies of other state film tax incentives programs, the State of Georgia loses money.

“Economic impact analyses commonly assume that all activity benefiting from the incentive would not have occurred without the incentive, but this is not likely realistic,” the audit concluded.

The finding follows a series of hearings by the Joint Tax Credit Review Panel, which lawmakers assembled to review the state’s tax credits and make recommendations for legislators to consider when they reconvene in January.

“This report highlighting the negative impact of the Film Tax Credit brings into focus the need for Georgia to get serious about tax policy reform,” Americans for Prosperity-GA State Director Tony West said in a statement. “A simple, fair, and predictable tax code has the potential to unleash growth and innovation so all Georgians have the opportunity to Reignite their American Dream. Corporate welfare and special interest handouts that create a two-tiered tax system should be eliminated.

“We’re optimistic the Joint Tax Credit Review Panel will provide solutions that the Legislature can adopt so that taxpayers will not continue to be fleeced by special interest tax giveaways that do not improve the lives of Georgians,” West added.

In 2005, state lawmakers passed the Georgia Entertainment Industry Investment Act, commonly called the Film Tax Credit. The aim was to promote production spending and initially included an income tax credit equal to 9% of qualifying expenditures by production companies spending at least $500,000 in the state.

Legislators amended the law multiple times, including a significant change in 2008, which increased the credit percentage on qualified production expenditures to 20%. The update also included an additional 10% possible for Georgia promotion or marketing and removed supplemental credits in the original measure.

According to a Department of Audits & Accounts summary, the tax credits generated in fiscal 2024 could cost the state nearly $1.1 billion through their carry-forward period.

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