This op-ed was published in the Halifax Chronicle Herald on November 14, 2019.
By: Matthew Lau and Paige MacPherson
The Nova Scotia Film Fund will cost taxpayers $6 million more this year than the government originally told taxpayers.
This was announced a day before the September fiscal update, which reported that program spending by government departments and agencies would be $143 million more than budgeted, not including another $29 million increase in infrastructure spending.
Are taxpayers getting a good deal for all of this increased spending? Certainly not, especially when it comes to the multi-million-dollar hike to film subsidies. Every dollar spent on corporate welfare for film companies is a dollar that won’t be spent on important priorities such as reducing taxes or improving health care.
Nova Scotia needs good jobs, and the government claims the increase in spending will provide “direct economic benefits” for Nova Scotians. But the research on film subsidies suggests otherwise.
In 2010, a study by the Center on Budget and Policy Priorities, a left-wing American think tank, concluded that governments should eliminate or at least shrink film subsidies since they are “a wasteful, ineffective, and unfair instrument of economic development” that provide taxpayers with little compensating benefit for the high costs they are forced to pay.
Film subsidies in Canada can get pretty out of hand. British Columbia taxpayers coughed up $7.7 million for the production of The Amazing Spiderman 2 (more than half of the film’s production cost in B.C.) and the film later grossed $709 million worldwide. Did those production companies really need a handout from British Columbia families?
Another study by economist William Luther found that film subsidies are both expensive and ineffective for economic development, since film subsidies don’t actually create new jobs, but rather shift jobs from other industries to the film industry.
So wasteful are film subsidies that almost every study (except those paid for by economic development authorities or the film industry), according to a Tax Foundation report, has found that for every one dollar of taxpayer money spent on film subsidies, the resulting economic activity returned less than 30 cents in tax revenues – even under the (unlikely) assumption that the subsidies were responsible for all of the film and television production that occurred.
For example, Connecticut’s Department of Economic Development found that for every dollar spent by taxpayers on film subsidies, only seven cents came back in the form of increased tax revenues. New Mexico’s Legislative Finance Office puts the returns to taxpayers at 14 cents per dollar spent. In Michigan, where the government attempted (and failed) to attract jobs by heavily subsidizing its film industry, every dollar spent only generated 11 cents in tax revenues. This caused the state to scrap its film subsidy in 2015.
Like other forms of cronyism, film subsidies are a lose-lose for taxpayers. If film production companies would have produced in Nova Scotia in absence of the subsidy, then the subsidy is nothing more than a corporate welfare waste.
And if these handouts are increasing the amount of films produced in Nova Scotia, they are simply taking money out of the hands of other taxpayers and businesses, eliminating jobs in other industries.
That’s clearly unfair. Job creators across the province have to pay higher taxes to fund this corporate welfare. Nova Scotia already has, along with Prince Edward Island, the highest business tax rate in Canada. Wasting more money on spending increases is something that Nova Scotia’s taxpayers cannot afford.
Whether it’s going to a luxury golf resort, a ferry company or a film production company, corporate welfare is a terrible use of tax dollars that could be better spent on important things such as tax relief, textbooks or health care. Nova Scotians are right to want a thriving film industry, but not one reliant on limited tax dollars.
Matthew Lau is an economics writer and Paige MacPherson is Atlantic Director of the Canadian Taxpayers Federation.