Adam N. Michel
After President Trump’s endorsement, a bipartisan, bicameral group of lawmakers recently introduced the Motion Picture, Television, and Entertainment Revitalization Act. The bill would create the first direct federal subsidy for Hollywood movie studios through a tax credit covering 20 to 30 percent of what film and TV productions pay their workers.
Dozens of states and countries have experimented with subsidies for the film industry. The overwhelming evidence is that the subsidies mostly don’t create new production, don’t meaningfully increase jobs or wages, don’t build an industry that survives without the subsidy, and are fiscally costly.
Using the film industry’s own analysis of the newly proposed federal film tax credit, I estimate the program could cost between $33 billion and $49 billion over ten years. That works out to between $54,000 and $81,000 for each additional industry job. Under less optimistic assumptions, the cost per job could rise to as much as $125,000.
State and International Film Subsidies Don’t Work
Today, 39 US states, Washington, DC, and Puerto Rico offer film incentives. Patrick Button investigated these state programs and found that adopting one increased the number of television series in the state by at most 1.5 series. He found no meaningful effect on feature films, employment, wages, the number of businesses in the film industry, or businesses in related industries. Professor Michael Thom finds that, between 1998 and 2013, state film incentives did not raise the industry’s share of the economy or its concentration in the state.
Another journal article found that film incentives can attract movies but found no strong evidence that they create a permanent movie industry in the state. A study of California’s film credit lottery similarly found that receiving a subsidy increased the probability that a film would be made in the state by 16 percentage points. However, the California Legislative Analyst’s Office concluded that even with the increase in production activity, “there is weak evidence that expanding the tax credit would benefit California’s economy as a whole.” It concluded that expanding the credit only makes sense if preserving Hollywood’s market share is treated as an end in itself.
The conclusion in California matches similar academic research. John Charles Bradbury looks at US state economies over a period when film incentives were being adopted, suspended, and repealed. He finds no evidence that film incentives have a positive impact on state economies. A Canadian cost-benefit analysis similarly concludes that, despite increased employment in the film industry, the film incentives made Canadians poorer overall, as the increase comes at the expense of economic activity in other sectors of the economy. In a similar cost-benefit analysis, Ireland’s Department of Finance estimated its film incentive resulted in a €72 million net cost to Irish society in 2016.
The most favorable academic work examines the early film incentive-adopting states of Louisiana, New Mexico, and Rhode Island, finding real gains in wages and employment. However, the same research finds that film employment and wages fell in states that later repealed or capped their programs. This shows that tax credits don’t build self-sustaining industries; they build industries that exist only to collect taxpayer subsidies.
Louisiana provides anecdotal evidence of how fragile a subsidized industry is. In 2015, the state capped how much in credits it would pay out each year and temporarily suspended its buyback of credits. The state’s economic development agency data indicate that film business fell by about 75 percent. Again, amid uncertainty over repeal and reform in 2024 and 2025, production in the state fell to a single active project in May 2025. It rebounded after lawmakers increased the subsidy amount that any single production can claim, showing the fragility, high costs, and dependence film subsidies create.
The positive assessments of film incentives almost universally come from industry-funded studies that rely on unrealistic assumptions. For example, a series of Ernst & Young studies concluded that film subsidies pay for themselves, returning as much as $1.90 in new revenue for every dollar subsidized. In a review of 29 assessments by independent government agencies in 23 states, Professor Thom found all but one cost the state more than it returned in new revenue.
Federal Film Tax Credit Could Cost Billions a Year
The Hollywood subsidy bill is led by Sen. Tim Scott (R‑SC) and Rep. Nathaniel Moran (R‑TX) and joined by Adam Schiff (D‑CA) and Linda T. Sánchez (D‑CA), among others. It would create a new federal tax credit for 20 percent of a qualifying production’s labor costs. The credit could rise to as much as 30 percent with bonuses for filming in rural opportunity zones or disaster areas, for independent productions, for spending across many states, and for increasing the number of domestic productions. The credit is transferable, so a production with little or no federal tax liability can sell it for cash to a company that has federal tax liability to offset.
Relying on a study commissioned by the Motion Picture Association (MPA), supporters claim the new federal film subsidy could create nearly 145,000 new jobs a year and $250 billion in new economic value added between 2027 and 2035.
Using the study’s own assumptions, I estimate the new federal film credit could cost between $3.3 billion and $4.9 billion per year, or up to $49 billion over a decade. The low end assumes every project claims the lower 20 percent credit, and the high end assumes all qualifying compensation receives the maximum 30 percent credit. The bill has no per-production cap, no limit on star salaries, and no cap on total cost.
At the high end, this new subsidy would spend as much subsidizing Hollywood movie studios as the National Park Service spends each year, at about $5 billion in annual budget authority.
The MPA estimate rests on several strong assumptions, including that without a federal subsidy, the US share of global TV and movie film production will fall below 30 percent, a decline of 13 percentage points for TV and 9 percentage points for movies, by 2035. With the credit, it assumes the US share rises to 65 percent, a significant change in both level and trend.
The study’s model also assumes no supply constraints for labor or other inputs and does not account for economic activity displaced elsewhere in the economy. To the extent the subsidy actually creates new wages, higher federal income and payroll tax receipts would offset some of the credit’s gross cost. But the empirical research surveyed above on film credits suggests that much of the apparent job creation reflects workers shifting between industries rather than net new employment. Excluding those assumed economy-wide spillovers, the study’s own model implies about 60,600 additional full-time-equivalent annual jobs directly in the film industry.
The $3.3 billion to $4.9 billion in new subsidies works out to between $54,000 and $81,000 a year for each additional full-time film industry job the MPA claims would be created. Because the credit would be primarily used by productions already filming in the United States, the fewer new jobs created, the more costly each additional job becomes, even as the total cost of the program falls. If the credit brings in half the new jobs and production expenditures the MPA assumes, the cost per additional job rises to about $83,000 on the low end and $125,000 on the high end. This range is consistent with a 2016 Massachusetts Department of Revenue evaluation finding that the state’s film incentive costs $109,762 per new Massachusetts resident job created.
Film industry jobs are also not low-wage jobs. The MPA study estimates that film and television production jobs pay about 50 percent more than the comparable national average. Higher-wage and higher-skill workers also tend to have more employment options, strengthening the empirical finding above that subsidies largely pull these workers away from unsubsidized productions and other industries.
Hollywood’s problem is not a shortage of subsidies. Thirty-nine states and dozens of countries already pay studios to little effect. A new federal film tax credit would primarily put taxpayers on the hook for multimillion-dollar Hollywood studio productions that would have largely been filmed here anyway. Congress should protect taxpayers from subsidizing Hollywood by rejecting the federal film credit, and states should repeal their programs, too. If filming in the United States costs too much, the answer is lower taxes and easier regulations for all businesses, not billions of dollars in subsidies for a single industry.
Notes: The labor cost estimate follows the report’s assumption that 53 percent of the $277.5 billion in total industry spending is labor costs and assumes that all domestic labor income qualifies for the credit. The figure for industry jobs created applies the 2.33 employment multiplier and 0.919 full-time equivalent conversion ratio to the study’s 153,700 reported total annual jobs.
