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May 10, 2012 by · Leave a Comment 

According to a study by the accounting firm Ernst & Young for the Motion Picture Association of America, state tax incentives for the movie industry have a trickle-down effect (what the study calls “multiplier activity”) that boosts businesses that have little to do with the film business. The report, titled Evaluating the Effectiveness of State Film Tax Credit Programs, concludes, “The multiplier activity accounts for jobs and incomes earned from in-state suppliers to the industry and from the spending and respending of the additional earnings of employees throughout the state economy.” While some other studies have concluded that the tax incentives do not result in additional tax revenue to justify such public expenditure, the E&Y report observed that “the relevant policy question in evaluating film credits should be, ‘Do the residents of the state get a good return for their investment?’ and not simply, ‘Does the investment pay for itself in terms of additional state tax collections?’ Film credit programs could still be relatively effective economic development programs even though the public sector is not a net beneficiary.” Finally, the report concluded that state film credits “have generated significant private sector benefits including thousands of jobs on productions, increased tourism activity, investment in industry infrastructure and the retention of existing production activity.”