Film tax credits

I have spent considerable time studying various state film tax programs. Since joining The Lincy Institute at UNLV, I have continued that research. And the more I learn, the more I realize such programs do not pencil out. The Wall Street Journal affirmed this last week when it reported the Hollywood entertainment industry is in a “downward spiral.” It is so severe that last year’s industry slogan of “Survive, ’til 25” has shifted to “Exist ’til 26.”

Gov. Joe Lombardo recently called for a special legislative session during which lawmakers might revisit a measure such as Assembly Bill 238 from the 2025 session. That proposal authorized up to $1.5 billion in transferable film tax credits against the financially strained state general fund. Supporters, after failing to pass the legislation last spring, are now rebranding this as a “jobs bill.” Based on Nevada’s previous evaluations and the evidence I’ve collected from other states and national experts, significant job creation seems unlikely.

Let me explain why.

When advocates claim “tens of thousands” of jobs, this is often inflated by “induced” job figures — tertiary impacts created through economic modeling rather than actual job guarantees. That is why, in the state’s traditional economic development programs, the Governor’s Office of Economic Development board considers only “direct” (the jobs on site) and “indirect” (jobs with vendors) impacts when making decisions. Those “induced” figures make for flashy talking points but cannot be verified as real employment outcomes.

More concerning, the 2025 GOED-commissioned independent report on the pending proposal identified gaps and noted it “does not provide estimates of employment, or wages associated with the studio, nor does it make explicit assumptions about the breakdown of above-the-line expenditures, which are largely out-of-state, versus below-the-line expenditures that are typically local.”

That contrasts sharply with the requirements GOED imposes on companies seeking standard incentives, which must meet strict benchmarks for job creation when receiving abatements or credits under Nevada law. These benchmarks include wage standards, health benefits and, in some cases, child care.

Tracking the benefits and jobs will be difficult. Maryland’s legislative evaluators reached the same conclusion, warning that it is “very difficult, if not impossible, to determine how much funding the state would have to provide each year … to develop a sustainable film industry that is also cost-effective to the state and local governments.”

Nevada is not the first state to face this debate. Massachusetts invested hundreds of millions in film incentives, and in a single year, $142.7 million of $216 million in wages left the state to pay non-residents. A National Bureau of Economic Research study reached the same conclusion: Film subsidies are often captured by out-of-state specialists who move from project to project.

In New Mexico, which has heavily invested in film tax credits and “brick and mortar” studios, a 2023 study commissioned by the state’s own film office acknowledged a shortage of in-state crew at all levels. Producers frequently reported that they had to bring in workers from Los Angeles to complete projects.

Please understand me: Construction jobs are important. However, Tyler Perry paused an $880 million studio expansion in Atlanta after being “shocked by AI.” According to news accounts, Mr. Perry said “I am very, very concerned that in the near future, many jobs will be lost. I really, really feel that very strongly.”

In related news, Disney Marvel is moving projects to cheaper labor markets overseas. A 2024 survey of entertainment companies found that three-quarters of respondents expect artificial intelligence to cause layoffs, job eliminations and company consolidations.

Suppose Nevada wants to use the tax code to create well-paying construction jobs. In that case, there are much better ways to invest $1.5 billion — through infrastructure projects, capital improvements and public works — than subsidizing temporary film sets or studio complexes that might become obsolete before the decade ends.

In addition, Nevada law clearly demands accountability when tax dollars are involved. Under state statutes, companies receiving abatements and credits are required to undergo strict tracking and auditing to verify that they create the promised jobs and wages. Compliance is straightforward for large, publicly traded companies. However, in film, tax credits are often granted to temporary LLCs set up as production companies for a specific project. This practice reduces accountability, increases complexity and invites ongoing disputes. Recovering abatements from these temporary LLCs, which receive film tax credits, is nearly impossible.

When considering whether to spend $1.5 billion to subsidize film productions, we should ask: Is this the most effective way to allocate funds that could be used for infrastructure, schools, law enforcement and health care? Economic development incentives, when implemented effectively, are powerful tools to attract industries, diversify the economy and create lasting employment opportunities for Nevadans. The opportunity today lies in manufacturing. To achieve diversification, Southern Nevada should focus on building the necessary infrastructure to attract manufacturing from companies seeking to reshore in the United States.

Evidence from other states overwhelmingly indicates that film tax credits do not cover their costs and have not led to the creation of sustainable jobs. It’s unlikely that these productions would be made entirely by Nevadans, especially given California’s proximity. With Hollywood less than an hour away by private jet, the involved movie stars could easily commute daily to Nevada. This proposal is likely to benefit out-of-state workers and companies, resulting in little return for Nevada taxpayers.

If the Legislature wants to invest in jobs, there are more effective options.

Michael Brown is fellow at UNLV’s Lincy Institute and a former executive director of the Nevada Governor’s Office of Economic Development.