The glamour of the movies — not to mention the big money behind them — has turned the industry into a big, glitzy, sought-after prize for economic development officials across the country. But lately, more and more states and municipalities are giving up on their Hollywood dreams — or at least the tax incentives they were offering in hopes of becoming movie meccas.
According to the National Conference of State Legislators, 13 states have eliminated their film production subsidies in the past 10 years, while several others have scaled back their programs.
The league said that as of last year, 31 states along with the District of Columbia, Puerto Rico and the U.S. Virgin Islands offered some form of film or television production incentives. That is down from 44 states in 2009, as states deal with budget pressures and officials view less-than-stellar reviews on the programs' effectiveness.
"Sometimes these credits work for a while, then they don't work and then they're withdrawn and then they're reinstated," author and industry researcher Robert Marich said in an interview with CNBC's "American Greed." "It also depends on the stomach of the voters to essentially subsidize an industry and lower taxes for a certain select industry, which means essentially raising taxes for everyone else."
Of course, this is not just any industry. Movies are glamorous. Productions offer locals the prospect of rubbing elbows with stars. And the studios spend millions of dollars on every production, creating a potential windfall for the local economy. (One of those studios, Universal Pictures, is a unit of Comcast subsidiary NBCUniversal, which also owns CNBC.)
The subsidies take multiple forms, but typically include tax credits, cash rebates on qualifying production expenses, or a combination of both. Production companies love the cost savings, and states and municipalities love the high-profile economic boost. State subsidy programs typically require an audit of the production's expenses before any taxpayer money is spent.