Lights, camera … tax break

When deciding on a primary location to shoot Reagan, the feature film’s executives settled on Oklahoma. That’s partly because filmmakers who make movies in the Sooner State can apply for a tax credit of up to 30% of qualified production costs.

“We probably wouldn’t have shot in Oklahoma if it wasn’t for that program,” Reagan producer Mark Joseph told me.

Oklahoma is one of more than a dozen states that offers film tax incentives to attract filmmakers and presumably boost the local economy. But even state incentives aren’t stopping American filmmakers from shooting in other countries. Pricey union dues and the cost of labor in the United States often push filmmakers to opt for locations in Europe or Canada. Last year, filmmakers and TV production companies shot roughly 45% of U.S. films and scripted TV shows outside the country.

Filming overseas lowers costs but introduces other challenges. “As a filmmaker, I don’t particularly want to travel to Eastern Europe and set up shop for six months,” Joseph said. “That’s not my idea of being conducive to my family and my life.”

Some members of Congress would like to bring American filmmaking back home. On Thursday, a bipartisan group of lawmakers introduced legislation offering a federal film tax credit, and President Donald Trump has already signaled his support. The measure, called the Motion Picture, Television, and Entertainment Revitalization Act, could help curb America’s filming exodus, allowing the United States to regain its competitive edge and giving more states a chance to become filming hubs. But many economists argue film tax credits haven’t proven worthy investments of taxpayer dollars, and they say a federal film tax incentive program would likely be no different.

Under the proposal, the federal incentive would apply to qualifying film and TV productions and could be combined with existing state rebates. To qualify, productions must spend at least $1 million, and 75% or more of filming must take place in the United States. On top of a base federal tax credit of 20% of labor costs, filmmakers may claim an additional 10% if they meet at least two of the following criteria: film in economically distressed areas, make an independent production, bring a certain amount of filming back to the United States from abroad, or film in at least 10 different states in a year.

Over the past decade, filmmakers have left Hollywood in droves. Between 2019 and 2023, California lost more than 17,000 entertainment-related jobs. To keep filmmakers in the Golden State, California Gov. Gavin Newsom more than doubled funding for the state’s annual film tax incentive to $750 million last year. Newsom added a post-production boost this September.

Even with state tax credits, some filmmakers have found that it’s much more cost-effective to make movies overseas. Despite a 2005 incentive program, production spending in Georgia fell from more than $4 billion in 2022 to $2.3 billion last year. Marvel, which previously filmed in Georgia, has relocated the majority of its projects to the U.K. According to the British Film Institute, 65% of total U.K. film production spending in 2024 came from major U.S. studios and streaming platforms.

To shoot in America, film companies must pay heavy insurance fees, union dues, and competitive wages. Location can also come with a hefty price tag, says Gregg Easterbrook, a cinematographer and assistant professor at Texas Christian University. Shooting in a major filmmaking hub like Los Angeles “will cost a lot of money and extra personnel to work through the Byzantine system of securing those kinds of permissions,” Easterbrook said.

But internationally, the cost of living is often lower and “unionization is not nearly so broad,” Easterbrook said, making labor significantly cheaper. Plus, around 120 countries offer their own film subsidies to alleviate production costs and attract filmmakers.

Last year, because of dwindling production in Hollywood, Trump appointed actors Jon Voight, Sylvester Stallone, and Mel Gibson as ambassadors to Hollywood with the intent of helping the film industry recover business lost to “foreign countries,” Trump wrote on Truth Social.

On Aug. 31, Voight met with Trump to petition him to back a federal film tax credit. The following day, President Trump announced his support for such a subsidy.

Easterbrook says small-budget filmmakers could reap the biggest benefits of film subsidies. “Those little percentages are much more meaningful for an independent production than they are for huge blockbusters,” he said. Still, he wishes film productions didn’t have to make artistic decisions based on which state or country offers the best subsidies.

University of Southern California professor Michael Thom wrote four peer-reviewed studies on film tax credit programs. He concluded in a report to the California Senate Revenue and Taxation Committee that these subsidies “produce little economic return, which means they are a negative for governments and taxpayers.” A 2023 New York state audit found that the state’s film production credit is “at best a breakeven proposition and more likely a net cost to NYS.”

Kristan Wong Karinen, a research analyst at public subsidy watchdog Good Jobs First, also argues state-level film tax incentives haven’t actually proven to be effective investments of taxpayer dollars. “Generally across the states, we can see the same pattern of, no matter how much is spent on this incentive, the return to the community is just not what it should be,” she said.

But Wong Karinen acknowledges that state film programs do influence where filmmakers choose to shoot. “We have seen that as a state increases its film incentive program, more production occurs in that state,” she said.

That finding shows that a federal film tax incentive could potentially entice American filmmakers to make more movies in the United States. “But then we still have the same questions about whether we are actually going to get a return back to the tax rolls,” Wong Karinen said. According to a September estimate from the Motion Picture Association, the spending on domestically filmed TV and film production would more than double by 2032 if the federal incentive passes.

Although California film studios will certainly benefit from the proposed legislation, Texas Christian University professor of film Kimberly Owczarski thinks a federal film incentive could have a reach far beyond Hollywood. If the legislation passes, “I do think it could help places that are not traditionally media centers get some production,” Owczarski said.

Mark Joseph thinks that filming Reagan in Oklahoma was a net gain for the state, “because of all the restaurants and services and folks we had to hire,” he said. “We brought more to Oklahoma than we received.”

Joseph also believes the federal incentive will allow the United States to maintain its edge in the international filmmaking space. “It’s really more about being competitive with other locales, whether it’s states or other nations,” he said.