Don't Buy Maryland's TV Tax Break Spin

More shows about politics will only be good for politicians.

Maryland, like many states, has a tax credit for TV and film productions, which is most famous for subsidizing the political shows “House of Cards” and “Veep.” But with both shows having ended their runs in the last year (after “Veep” moved to California, which offered it more money, for its last few seasons), Maryland is looking for its next big hit.

Enter “The President Is Missing”:

A television pilot based on a novel co-written by President Bill Clinton and author James Patterson will be filmed in Maryland, potentially sparking a major new production for the state, officials said Tuesday. […]

If it's picked up for more episodes, state officials believe the production could have the same kind of financial effect as "House of Cards," the popular Netflix series filmed in Maryland that ended its six-season run last fall. According to the Maryland Film Office, the political thriller had a total economic impact on the state of $700 million, created jobs for more than 2,000 Maryland residents per season and generated income for more than 2,000 Maryland businesses per season.

Don’t buy those rosy numbers, though. Maryland in general, and this episode in particular, actually show why TV and movie tax breaks sound good in theory, but don’t work in practice.

To start, statistics regarding the effectiveness of tax breaks like this one tend to get inflated by large multipliers, which is the measure of how much extra economic activity a dollar spent on a particular program creates. Most economists, for something like a film tax credit, won’t go too much above $1, but folks interested in promoting that program will use $3, $6, or even, in one study, $9.

I don’t know where the Maryland Film Office got its particular figure, but I’d bet on it being bolstered by an unreasonably big multiplier. (I worked with the Maryland Film Office on my book. They’re nice folks and I don’t think they’re trying to bamboozle anyone. But we have a fundamental disagreement over the worth of the tax breaks they promote.)

But even if we take those numbers at face value, they don’t actually amount to a lot: $700 million in economic impact and 2,000 jobs make up one-tenth of 1 percent of Maryland’s total economy and less than one-tenth of 1 percent of total employment.

For that, the state spends millions of taxpayer dollars per year.

Now, those taxpayer expenditures for film and TV tax breaks — $8 million this year, rising to $17 million in 2022, with 2014 being the peak at $25 million — aren’t huge as a percentage of Maryland’s budget, either. But since Maryland, like most states, has a balanced budget requirement, everything it pays for literally means not paying for something else, so every tax dollar should be spent to maximize welfare and economic development.

But, uh oh, the Maryland Department of Legislative Services has found that the state’s economy is actually smaller in the long run due to its spending on film and TV tax credits.

It’s easy enough to see how that strange-on-the-surface dynamic would occur. After all, film and TV production is extremely mobile: Just about anywhere can be portrayed as anywhere else. Case in point, all these political shows about Washington, D.C., that actually film in Maryland, with Baltimore standing in for the capital city.

That mobility enables production companies to play states off against each other, requiring larger and larger sums for them to keep filming in a particular place.

One analyst in my book called this “perpetual competitive purgatory.” It’s why Louisiana used to be the feature film capital of the U.S., but that honor is now Georgia’s. Louisiana went all in on subsidizing films, but was eventually spending such an outrageous amount that it had to cap its program. Georgia swooped in to pick up the pieces.

Someday, perhaps soon, some other state will inevitably do the same to Georgia, and around and around we’ll go.

Maryland actually experienced this bidding war with “Veep.” The show was filmed in Maryland until it got a better deal, and then poof, it was gone. “House of Cards” also threatened to leave the state back in 2014 unless the subsidy spigot kept flowing; its production company lobbied hard, and lawmakers afraid of looking weak on jobs caved and gave the show more money.

Now, with “House of Cards” having ended, the state is desperate to coax in new productions, so much so that its officials are shouting to the heavens about a new pilot that might turn into a full series.

That desperation ends up giving production companies the upper hand.

The upshot of all this discussion is that film and TV tax breaks don’t so much create jobs as rent them for a little while. As the Maryland Department of Legislative Services put it, “the credit does not provide any sustainable employment; the economic activity is dependent on continued productions each year and does not provide long-term economic development.”

It’s not that nobody gets a decent job with good wages from spending on TV and movies, mind you. But more people would benefit if that spending were better targeted on building long-term, inclusive growth.

There’s one group, though, that bringing a new TV show to town would definitely be good for: The local politicians who get to take credit for job creation, attend glitzy events with movie stars, and maybe, cynically, win some campaign donations from big Hollywood companies.

Quick news pieces on film and TV tax credits like the one I highlighted above tend not to get into the actual tradeoffs of the program. But they’re real. Everything seems great while the camera is rolling, but then the set goes dark and the state is left with little to show for its efforts.

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