Could vetoed KS film tax credits yield economic growth? Lawmakers, experts disagree

The CW’s hit television show “Supernatural,” a paranormal drama series following the adventures of brothers Sam and Dean Winchester, has over 100 episodes set in Kansas – but none that were filmed in Kansas.

Despite Lawrence holding the title of the official hometown of the demon-hunting duo, the show – which averaged millions of viewers per episode – was filmed 2,000 miles away in Vancouver, Canada.

Industry professionals say there’s a reason shows like “Supernatural” don’t film in Kansas. The interest is there, they say, but a lack of tax incentives for film and production drives producers away from the Kansas.

Justin Begnaud, a Prairie Village film and television producer, has produced films for Universal Pictures, Netflix, and MGM, to name a few. Begnaud, who finances productions, said he has told a handful of productions to bypass Kansas when choosing a film location, and said he would never choose to work in the Kansas because it offers no fiscal benefits.

Begnaud said he fears Kansas will be the last to the table to pass film incentives and become “irrelevant.”

“Netflix and those big players will never come to Kansas even if the show or movie is set in or about Kansas,” he said. “They will go to another state because they’ll get 20 cents on the dollar for every dollar they spend in that state. And Kansas doesn’t offer that. So, what’s the point?”

Last week, Kansas Gov. Laura Kelly vetoed a policy that would have made $10 million in capped income tax credits available for Kansas filmmakers. They qualify for tax credits equal to 30% of expenditures, but the majority of that money would have gone to attracting out-of-state productions.

The bill was tucked into an omnibus tax bill Kelly said was too expensive and irresponsible.

“The lack of a fiscally responsible tax cut bill jeopardizes other tax policy passed before adjournment, such as legislation to support Kansas’ film and digital media industry,” she said. “The Legislature cannot overpromise tax cuts without considering the overall cost to the state for future years. We cannot start with our expenses and then look at our income. Families and businesses do not budget like that; neither should Kansas.”

Do film incentives promote economic growth?

At least 40 states already have some form of film incentives – including all of Kansas’s border states – but Kansas allowed its program to expire in 2012 and never renewed it. And while tax breaks have robust bipartisan support in the Legislature, they’re met with skepticism by some economists.

Proponents frequently point to Georgia as a beacon of success for film subsidies. But while the state’s un-capped credits have increased production, tourism, and jobs, a 2020 state audit found the state, along with many other states who have implemented the policy, suffered “significant revenue losses.” It also revealed the state only saw a return investment of 10 cents for each dollar spent on the tax incentives, but did note that return investment was higher for local governments.

A 2018 study by Kennesaw State economist John Bradbury found that film incentives fail to promote states’ economic growth. Many other studies reached the same or similar conclusions.

“The lack of efficacy of targeted film subsidies to promote economic growth is also consistent with several studies that find the economic activity resulting from targeted development incentives is not sufficient to cover the costs of the subsidies,” Bradbury wrote.

But proponents like Stuart Little, a lobbyist for Grow Kansas Film, say that’s a misreading of the data. The real benefits from film tax incentives come from boosting local economies rather than funneling it back to the state, he said.

When filming in Kansas, production crews will spend money at local restaurants and retailers, stay in local hotels, buy locally-made materials for set construction, and hire Kansans for jobs like security and construction, Little said. And expenditures are only eligible for reimbursement if it’s spent in the state, he emphasized.

“This is an incentive to bring production into the state,” he said. “The state will provide after the fact a credit up to 30% of the expenditures. But to give that tax credit, some productions are spending that other 70% in the state. The money doesn’t come back to the state, it’s spent out in the community.”

“The state is never going to make dollar-for-dollar credit back,” Little said. “It’s an incentive to bring in all this other work and build up an industry that does not exist.”

Nearly impossible to compete

Under the failed bill, production expenditures would only be eligible if the money is spent in Kansas or through Kansas-based vendors. But just 10% of the total amount of tax credits are allocated toward Kansas-based production companies.

Sen. J.R. Claeys, a Salina Republican, said the policy’s goal is to create permanent studio and production infrastructure that employ local crews. Claeys said that attracting out-of-state productions to utilize the local workforce would bring in more jobs, keep filmmakers in Kansas, and increase revenue.

Claeys said Hallmark’s presence in the state along with Hollywood studio Pure Imagination Studios’ recent $41 million studio build in Salina is further reason to push for the incentives.

“You want things that aren’t already here,” he said. “But we also have companies that already exist in our state that would do productions in our state if they’re incentivized to do so. They prefer to be local but financially have to make the best decision for the company, so they’re doing that. We’d like to see them come home.”

Alan Carr, the executive director of Visit Kansas City Kansas, said Missouri’s tax incentive – which has brought in projects like HBO’s “The Last of Us” and Netflix’s “Queer Eye for the Straight Guy” – makes it nearly impossible for northeast Kansas to compete.

Carr said tourism is a huge factor when considering implementing film subsidies. He referenced Paramount’s show “Yellowstone” – which brought in an estimated 2.1 million visitors to Montana and increased spending by $730 million – as a prime example.

“We’re just not competitive,” he said. “Our production community in the metropolitan lives on both sides of the state line, but filmmakers have to make sure they’re spending the required dollars in Missouri. It’s more challenging for the folks on the Kansas side to be a part of those projects and definitely affects the kind of tourism assets we’d be concerned about.”

Film school graduates leaving Kansas

Proponents say the benefits of the subsidies go much further than potential economic boosts through tourism and industry growth – it could keep people from fleeing the state. Since 2020, just eight of 22 major Kansas cities experienced population growth, according to United States Census Bureau data.

The failed legislation would have set up scholarships and grants for Kansas film students to grow the industry. One would have granted students money if they reside and work either in Kansas or for a Kansas-based company for two years following degree completion.

Many film students are leaving Kansas after earning their degrees because there is no meaningful film work in Kansas. Film subsidies and scholarships could keep them here to build the industry, said Melanie Addington, the executive director of the Wichita-based Tallgrass Film Association.

“Having left Mississippi before they reinstated the film tax credits, there was a period where people were getting their film degrees and moving to Atlanta,” Addington said. “You see that here where recent graduates immediately move to other states because there’s no work here.

“So ideally if we have incentives and are building our film industries, those people will want to stay there,” she said.

Ganon Evans, a lobbyist for the Kansas Policy Institute, said he opposes tax reimbursements for filmmakers but agreed that attracting filmmakers was important. Alternative solutions, such as a reduced sales tax on film equipment, may give Kansas a better outcome than film subsidies.

“Instead of gambling with taxpayer dollars on which projects will be successful or not, the best policies are those that remove barriers and reduce costs for everybody and make it easier to produce films,” he said.

Claeys said the bill may be reconsidered during the upcoming special election called for by Kelly.