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MPAA Refutes USC Report on Film Tax Credits: ‘This is Academic Malpractice’

The Motion Picture Association of America blasted a recent study from University of Southern California that called into question the effectiveness of tax breaks for movie production.

A report led by Michael Thom, a USC assistant professor of public policy, found states that offered tax credits to lure the production of movies within their borders and away from major movie centers like New York and Los Angeles saw little fluctuation in growth of long-term employment. Thom’s study found that 26 states offering refunds to the production for portions of the money they spent in their jurisdictions saw no gains in employment, and that 18 states that allowed for the sale or brokerage of tax credits to another company in the state had no significant impact on wages.

Neither type of incentive “affected gross state product or motion picture industry concentration,” the report noted.

Now the film industry’s lobbying group is countering those findings with its own analysis, which found “the study contains a number of fundamental scientific flaws, including poor data selection and failure to account for different size programs across states, which render its conclusions invalid.”

“It is troubling and without excuse that such a false and misleading study, without statistical and intellectual foundation, would be recklessly promoted by an otherwise respected educational institution such as USC. It severely tarnishes the reputation of the university as well as the academic credentials of the author, USC assistant professor Michael Thom,” said Vans Stevenson, the MPAA’s senior vice president for state government affairs. “This is academic malpractice, designed to make a provocative statement rather than offer sound policy analysis.”

The MPAA contends that Thom used a broad category of jobs data, which took in jobs that are not tied to production, such as ticket-takers and sound recording engineers.

“It’s a narrow focus and a very unusual result,” said Julia Jenks, who wrote the MPAA’s rebuttal. “The design is very flawed.”

Thom issued this response on Wednesday:

“The film subsidies study, ‘Lights, Camera but No Action?;’ was published in a peer-reviewed journal, The American Review of Public Administration after two rounds of rigorous, double-blind review. That means that several academic researchers who are experts in the field evaluated the data, analysis and methodology, and determined the study to be credible and the analysis valid for publication. This study further validates previous work by other academic researchers, think tanks and state government auditors.

“Through my research, I found that there were in fact short-term benefits to state film incentives, such as temporary wage gains and obviously some commerce. However, I also found that the incentives had no sustained impact on wage growth and little effect on jobs and economic growth. The peer-reviewed analysis that I conducted accounted for differences in spending across the states and over time.

“For a second study published recently by the journal American Politics Research, I examined why states kept or terminated their incentives from 1999 to 2015. I found a half dozen states ended the incentives as the Great Recession eased. States that slashed the incentives already had spent very little or were skeptical that the film incentives program wasn’t working.

“I have included in my research recommendations for best practices if states choose to start or continue to offer filmmaking incentives. For example, before adopting or renewing such a program, states should hire third-party researchers to conduct multiple analyses of the economic benefits and compare the results. I also recommend that states cooperate with each other on program design to minimize risks for taxpayers and more importantly, to safeguard their programs from potential malfeasance.”

In an interview, Stevenson said that Thom was “standoffish” when the MPAA approached him to discuss the paper.

“I find it extraordinary that a study would go out and be peer-reviewed and not recognize that the basic data they’re using are wrong,” he said. “You would think when you put the USC name on a study they would take more care.”

Stevenson argued that Thom could have obtained better jobs figures from payroll companies that work in the film business or from unions.

“They’re looking at a hometown industry,” he said. “There’s all kinds of data that’s been ignored.”

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