Maryland's film industry employs a lot of good people, mostly highly skilled laborers. Because the state has been home to a string of television series over the years, of which "Veep" and "House of Cards" are only the latest, many of them have set down roots here and have contributed to the community in various ways beyond their role in the economy. But their economic contribution is not insignificant either. The money these productions spend on wages and other expenses has benefitted many local businesses. We know: The Sun, which has rented space to "House of Cards," is one of them.
The question the state faces, though, is whether the money Maryland spends on film production incentives could better be invested in something else, and a report by the state's Department of Legislative Services suggests that's almost certainly the case. The report runs to 69 pages and considers a wide variety of factors in its analysis, but the bottom line number is that for every dollar Maryland invests in film production credits, it gets 10 cents back in state and local tax revenues. To put that into context, the state could theoretically do six times better by buying its own lottery tickets.
Maryland's film production credits are not, properly speaking, tax credits, at least not in the sense that they are a reduction in the amount of state taxes film production companies pay. They are more akin to a direct subsidy to offset up to 27 percent of the companies' Maryland wages and other expenses. They also have little to no lasting effect. As DLS notes, the film industry is highly mobile and has proven itself adept at skipping from one state to the next depending on who's offering the best incentives. In fact, "House of Cards" threatened to do just that this spring when Maryland legislators balked at offering the full $15 million the show had applied for to film its third season here. Ultimately, Gov. Martin O'Malley worked out a deal with the show's producers that kept them here at the bargain price of $11.5 million.
What the DLS analysis makes clear is that any increase in employment, gross domestic product and increased disposable income is modest and short-lived. Money spent by the state on credits for film companies means either less spending on other government programs or higher taxes, either of which offset the economic benefits. Moreover, the jobs don't outlive the credit, so unless the state spends more and more each year on the program, it could actually end up worse off than if it had done nothing at all.
There are, of course, intangible benefits to having movies or television shows filmed in the state, for example the Frederick County winemaker who, according to the head of the Maryland Film Office, sold out of her most costly vintage after it was featured on "House of Cards." But those sorts of effects are surely softened by the fact that the two productions that have accounted for 98 percent of incentive spending in recent years — "House of Cards" and "Veep" — are not actually set in Maryland but rather in Washington, D.C.
Gov.-elect Larry Hogan has previously criticized the state's decision this year to sweeten the pot for "House of Cards" by diverting money intended for Maryland's arts community and devoting it to incentives for "Hollywood millionaires to produce subscriber-only TV shows." But given the DLS report, we hope he will take a closer look a program as a whole. He has promised to comb through the state budget for wasteful spending, and — with apologies to the many non-Hollywood, non-millionaires whose livelihoods are dependent on this program — the film credits look to be a prime target.
Rather than lavishing incentives on an industry that will only grow in this state in proportion to the amount of money we dedicate to it, why not invest instead in sectors that stand to grow on their own? In the 2014 fiscal year, Maryland dedicated $25 million to film production credits, but only $10 million to support the biotechnology industry and $3 million for the cybersecurity industry. Either of the latter two builds off of existing competitive advantages Maryland has over other states in a way that film credits do not.
The fact that 36 other states and the District of Columbia offer film production incentives is not evidence of their wisdom but of their foolishness. As "House of Cards" so ably demonstrated this year, we will be at constant risk of being outbid by other states for film production activity. It's a race we can only win by losing.