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HAROLD HILL MARCHES EVERYWHERE

March 31, 2008

The Tax Policy Blog has an excellent short discussion of the madness of filmmaker tax credits that is sweeping the nation. An excerpt:

Foremost, it shows that economic actors (like owners of businesses) respond to incentives, whether you say the credits fall under the heading of lower taxes or a government subsidy (essentially the two are equivalent).

Amen to that!

It also highlights a prisoner's dilemma problem that the economy of the nation as a whole faces. Each state government may have an individual incentive to give special subsidies to film makers to lure them into their state. However, these tax credits must be paid for by higher taxes (or lower spending) for others. In the end, if each state passes a film tax credit (which it appears may happen) given that another state has and that it may be in their own self-interest to do so, the national economy has had another tax distortion imposed on it. Overall, film production will be favored at the expense of higher taxes on other activities, leading to too much film production and too little of something else, thereby lowering the nation's economic well-being.

It's short; read the whole thing.

Related: HAROLD HILL GULLS THE HOUSE

Tags: corporate welfare.economic development.iowa tax policy.