As children get ready to storm the streets in zombie and vampire costumes for Halloween, a state Senate race in Washington might hinge on whether the government should continue subsidizing the production of Z Nation, a SyFy channel series about a zombie apocalypse.
On one side is incumbent state Sen. Michael Baumgartner, a Republican who is working to keep his seat. On the other side is Democrat Rich Cowan, owner of North by Northwest, the production company that helped bring the Z Nation production to Spokane.Cowan has been noted for helping bring hundreds of jobs to Spokane for the production. Baumgartner has fired back at Cowan with a radio ad that said those jobs were only temporary and at the taxpayer's expense."The way he makes his movies is there's a $7 million subsidy that the state gives to filmmakers to go out and make movies," Baumgartner said. "So every job Rich Cowan creates is actually paid for by the taxpayers."The Washington State film incentive gives tax breaks to motion picture companies. According to the bill's roll call, Baumgartner voted for it in 2012.
The principled case against zombie subsidies is pretty straightforward. Just as the government shouldn't subsidize the production of, say, shoes, it shouldn't subsidize movies, TV series, documentaries, or media of any sorts. Governments that shirk the rule of law in favor of rule by favors lose public trust and suffer as a result.
If a moral argument doesn't sway you, then maybe a utilitarian one will. From a basic cost-benefit analysis, these handouts simply don't make up in economic gains what it cost taxpayers in the states. Several rigorous studies have examined whether subsidy programs create useful economic growth in-state. The answer: Nope.
Massachusetts did a study that found the overwhelming number of jobs generated by location shoots went to out-of-state workers.College of Charleston economic analyst Frank Hefner found that of each tax credit dollar offered by South Carolina, just 19 cents came back to the state.The Louisiana Legislature's chief economist, Greg Albrecht, reported that incentives were likely costing the state millions more than it was generating. "Does [the state] receive more tax receipts back, either directly or indirectly, than what we're paying out?" he wrote. "The answer is definitely no."Meanwhile, critics of incentives were increasing. Economist Bob Tannenwald of the Center on Budget and Policy Priorities said "the revenue forgone via film tax credits has to be made up elsewhere, either in tax increases or spending cuts. Both depress the economy and cut off the incentive's stimulus effect."In California, there was evidence that the number of film jobs created after tax incentives were enacted declined. TV and film production jobs went from almost 123,000 in 2004 to 107,400 in 2012. The state's legislative fiscal analyst reported twice—in 2010 and 2014—that incentives were of dubious value to the state. (It didn't help that they may have fostered corruption. Sen. Ron Calderon, a Democrat from California's 30th senate district, is under indictment for allegedly accepting money to try to expand the state's movie incentive program to independent producers.)"
The evidence against targeted benefits for specific interests or industries is not limited to the movie and TV industry either.
A recent study by George Mason University's Chris Coyne and Lotta Moberg shows that targeted benefits generally fail to achieve their stated goals whether they take the form of grants, tax credits, or subsidies. Among the major negative consequences that targeted benefits create are misallocation of resources, increases in lobbying and rent-seeking, increases in cronyism, and a bias toward large firms, say Coyne and Moberg.
With that in mind, let's look at just how much assistance states give away to private companies across the United States.
Spoiler alert: It's a lot.
The following charts show corporate welfare is a significant problem at the state level, with New York leading the country in terms of total dollar amount (almost $22 billion) and the number of individual deals (70+). Washington state, home of the Great Zombie Subsidy Debate of 2014, clocks in at number two.
Mercatus.org
Just nine states account for a majority of dollars spent subsidizing private companies:
(For more information about the data go here.)
There are different ways to cut the numbers, obviously. If we look at the total subsidy amount by state GDP for the years that the majority of each states' subsidies were awarded, New York drops to 19th out of 50. While New York had the highest amount of overall total benefits, the $21.7 billion in known subsidies only constitutes 0.23 percent of the roughly $9.5 trillion in total state GDP since 2006 (the year after which the majority of the states' known subsidies were dispersed).
In terms of subsidies per state GDP, New Mexico is the worst, doling out 2.24 percent ($4.1 billion) of its $181.4 billion state GDP since 2012 to targeted benefits to corporations.
Regardless of we cut the data, one thing is sure: States are spending a whole lot of money catering to private businesses. And state corporate welfare is bipartisan activity. So much for Democrats being the defenders of the little guys and the Republicans claiming to believe in free markets.
To bring it back to the state of Washington, it's worth mentioning that subsidies to TV shows about zombies aren't its biggest handout. The Evergreen State is, after all, home to Boeing, one of the very biggest corporate-welfare recipients by any accounting. The airplane manufacturer is also the biggest recipient of Export-Import Bank subsidies from the federal government. And it eats Department of Defense dollars the way that zombies eat brains: for every meal of the day and every day of the week.
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