Maybe you’re like me and you stick around until the end of the movie credits. (Or maybe you’re normal?) Sometimes it’s a key part of the experience—Marvel films famously have a (occasionally worthwhile) scene at the end of the credits of each of their theatrical releases.
If you stick around for the credits, you may have also noticed the state of Georgia’s giant peach logo popping up in the tail end of the credits scroll after several high-budget movies, particularly those made by Marvel.
That’s because the state of Georgia has been handing out billions of dollars in tax credits for movie and television production for nearly two decades. These tax credits basically subsidize the cost of filming a television show or movie in the state of Georgia. Marvel alone has filmed nearly two dozen of its productions there.
One of the conditions of receiving the tax credit is the production company putting that logo in the end credits. (I also wonder if the American Dental Association is another key lobbying influence here. I, for one, grind my teeth strongly whenever I see that logo because … well, read on.)
According to the Wall Street Journal, Marvel Studios productions have decamped to the United Kingdom, mostly because of lower labor costs there.
In other words, even these overly generous tax credits were not enough to keep the Marvel productions in Georgia.
The state wasn’t getting much in return for the handouts anyway. According to a 2023 study from Georgia State University—requested and paid for by the state’s own Department of Audits and Accounts—the estimated return on “investment” per dollar via these tax credits was no more than 19 cents. This lines up with many other studies, which estimate that when you tally up all the costs—including the opportunity cost of what the money could have been spent on otherwise, including not spending it at all and letting the private sector choose the best targets for investment capital—these film tax credits are, at best, much more costly than they are worth.
This brings us back to Marvel’s departure. It is just the latest example of one of the dirty secrets of state government subsidies geared to so-called “economic development”: the subsidies end up paying companies for something they would have done anyway without the taxpayer-funded handout. Marvel was likely in Georgia in the first place due to the state’s favorable labor cost climate at the time. When that changed, so did the balance sheet math.
As Scott Lincicome, Marc Joffe, and Krit Chanwong point out in their recent Cato policy report, “Reforming State and Local Economic Development Subsidies”:
“[S]tate and local subsidies often pay companies for investments they would have made regardless of whether a business incentive was offered. Notably, research shows that very few business incentives are directly responsible for causing the investment at issue. In fact, a literature review from 2018 by the W. E. Upjohn Institute for Employment Research found that subsidies and incentives decisively affected only 2 to 25 percent of all investment decisions, implying that at least three of four incentives did not play a crucial role in attracting an investment. Similarly, a 2015 survey of North Carolina executives found that the availability of state and local business incentives ranked below more than a dozen other factors in their assessment of the state’s business environment.”
In other words, successful business models don’t really change once a state government throws somebody else’s money at them.
If they do, it’s best to refer to the wise words of former Congressional Budget Office Director Doug Holtz-Eakin: “If your business cannot survive without a tax provision, you don’t have a business—you have a tax shelter, and it should go away.”