How Jimmy Fallon Got a Silly TV Tax Break

Minnesota got fleeced by late night TV. Its fix doesn't go far enough.

It’s always kind of funny when lawmakers are shocked to discover that laws do what they say they do. Such was the case when Jimmy Fallon’s “The Tonight Show” received $267,000 in subsidies from Minnesota. The whole affair shows how absurd the discourse around tax breaks and other giveaways for movie and TV production can get.

First, the background: Fallon filmed an episode in Minnesota for the night of the 2018 Super Bowl, which was played in Minneapolis. It qualified, after a bit of a back and forth with Minnesota officials, for a state program that uses rebates to incentivize film and TV production – despite the fact that an on-location Super Bowl episode pretty much has to take place where the Super Bowl is, so no incentivizing was necessary. (Case in point: Fallon put together a Super Bowl broadcast in Arizona in 2015 without receiving any funding, since the state has no film incentive program.)

After realizing their state had wasted hundreds of thousands of dollars on a New York variety show – which went to, among other things, Fallon’s salary – Minnesota officials were understandably upset. So this week, they rolled out changes to the “Snowbate” program, as it’s called. (For the record, rebates for production costs are not exactly the same as tax breaks, but the practical results of both are close enough that I use the terms interchangeably.)

Here’s what Minnesota did. First, Minnesota Film and TV, which oversees the rebate program, will now evaluate projects on several criteria, including whether productions create local jobs and economic growth, rather than just handing out rebates on a first-come, first-serve basis.

Read that sentence again. I’ll wait.

Yes, pre-Fallon incident, whichever production showed up and put its hand out first received subsidies. That’s not a great way to do business, for what I hope are obvious reasons.

Minnesota also will no longer dole out money for one-off TV episodes tied to national events, since having a production in town for a hot minute doesn’t do much for the economy. And for good measure, it won’t dish out funds for anything having to do with elected officials, after a documentary about Democratic House Rep. Ilhan Omar received a rebate.

These changes are all well and good, as far as they go. But at the same time, the folks running the film/TV subsidy program are pushing for an increase in the half million dollars annually they currently spend.

Everyone in Minnesota should resist the temptation to grant that increase, because even if the money won’t be wasted quite as efficiently under the new rules as it was under the old, it still won’t do the average taxpayer much good.

As I explained in my book and in many other places, subsidizing film and TV production is for suckers. States, at best, subsidize some short-term economic activity at an astronomical cost per job created, and at worst end up paying to fly wealthy actors and producers into their state to do a bit of work and leave. There’s no permanent economic activity built, and no sustainable industry that will ever stand on its own without being propped up by the state.

The vast bulk of the economic evidence backs me up on this. And now we can add one more study to the mix: A recent effort by Tulane University’s Patrick Button found that the very raison d’etre of film subsides doesn’t really hold up. The spending is supposed to attracts loads of films that never would have come to a particular place otherwise. But that’s not really what happens, especially when it comes to feature films.

While Button found some increase in TV series moving to states due to subsidies, “this increase in filming leads neither to the development of a local film industry nor to any meaningful spillovers to related industries. This means that [state film incentives] do not achieve two of their primary goals: establishing a local film industry or creating economic development in general.”

Now, you might be thinking to yourself: “Well, Minnesota said it is going to evaluate future productions for local impact, and if every study says those impacts don’t exist, then no project will get funded, right? Problem solved!”

If only it were that easy.

You see, there’s quite the industry built around baking up absurd estimates regarding how much economic activity is created by a movie or two. Local film offices and consulting firms work together to gin up wild numbers. One North Carolina “study” even claimed that every dollar spent subsidizing movies in that state created $9 of economic activity, a number which I’m sure made any economists reading this spit out their coffee. Even the most effective program doesn’t produce anywhere near that much economic oomph.

It’s not that the folks producing these numbers are necessarily malicious, of course. It’s just the old Upton Sinclair quote at work: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it.”

So that’s likely how things will go henceforth: Minnesota will approve productions that won’t actually help the local economy, via some fantasy numbers that justify them. None of which is to say that the measures to prevent a future Fallon fiasco are bad. But it would be a whole lot better if the state followed the lead of the 13 others since 2009 that have ditched their film subsidy programs entirely.

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