Lawmakers say tax credits could lure films, TV shows to Kansas. Experts say it’s a waste

For more than a century, Hallmark Cards has built and ran its global business from Kansas City, where it manages the Crown Center complex, employs greeting card artists and designers and oversees a chain of retail stores and products.

But Hallmark’s Christmas movies, perhaps the company’s best known export, aren’t filmed anywhere close to home. For years, the Hallmark Channel has filmed its movies and TV specials in Canada, where lucrative tax credits and favorable exchange rates make filming more affordable.

But the media giant says new incentives could bring some of its productions to Kansas and Missouri — if lawmakers in Topeka and Jefferson City approve new subsidy programs. Both states previously offered tax incentives for film productions, but phased them out.

Now, both want back in the game as a majority of American states now offer some tax benefits for film and television.

Researchers repeatedly find that these programs are a waste of taxpayer resources that don’t bring meaningful economic benefits to states. But lawmakers, tourism groups and chambers of commerce say Kansas needs film incentives to lure big productions that can build up new industries and provide invaluable marketing to huge audiences.

And companies like Hallmark say incentives are crucial if they are to bring any production closer to home. Last year, the company made 92 movies, mostly in Canada, though it also filmed in Utah, North Carolina and Hawaii — states with film subsidy programs.

In written testimony supporting Kansas film incentive legislation, Hallmark, which is headquartered in Kansas City, Missouri, said new incentives would allow the company to “consider Kansas as a film production site.”

“Without film tax credits, we are unable to shoot and live within our budget parameters,” a Hallmark executive wrote earlier this month. “Tax incentives are the main driver in our decision where to shoot; we adjust the creative to fit the state with the best tax incentives.”

The Kansas bill, which was approved in the state Senate by a 28-7 vote last week, would make $10 million in new tax credits available to film production companies each year. One-tenth of those funds would be set aside for Kansas-based companies.

The legislation would allow the Kansas Department of Commerce to issue sales tax exemptions and income tax credits. Film and television productions can qualify for tax credits equal to 30% of their qualified production expenses. It also includes scholarships for students who plan to work in the film industry in Kansas.

Kansas state Sen. Brenda Dietrich, a Topeka Republican, referenced efforts in Missouri and approved legislation in Oklahoma as added motivation for passing the bill in Kansas.

“There are so many folks who want to showcase Kansas, our unique landscapes and our communities and we are bumping up against neighboring states like Oklahoma,” Dietrich said. “We can showcase Kansas if we position ourselves to provide a more favorable business climate for our community.”

Kansas state Sen. Mary Ware, a Wichita Democrat, said the films created in the state would serve as a “constant advertisement” for Kansas.

Research shows poor track record

In 2009, more than 40 states had some type of film incentive program. But years of abuse, corruption and research findings that pointed out flaws in the programs caused many states to pull back.

More than a dozen states had dropped their film programs by 2020, but some states began reintroducing their programs or expanding them during the coronavirus pandemic, according to incentive watchdog group Good Jobs First.

In 2009, Iowa ended its film tax credit program after a state audit uncovered $26 million in improper tax credits. That led to a years-long scandal in which seven people were convicted of fraud or theft.

Kansas state Sen. Kellie Warren, a Leawood Republican, pointed to Iowa as a cautionary tale.

“We have, at least in the research I’ve seen, seen other states that had a problem with it,” she said.

But other states de-emphasized the program for a much simpler reason: they simply do not work.

As the Center on Budget and Policy Priorities, a think tank which advocates for economic justice and tax fairness, wrote in 2010, such programs generally do not pay for themselves. They reward companies for productions they might have undertaken anyway.

The organization found that states committed some $1.5 billion to subsidizing film and television productions in 2010 — “money that they otherwise could have spent on public services like education, health care, public safety, and infrastructure.”

A separate peer-reviewed study published in an academic journal in 2016 looked at more than 40 state programs over 15 years. Researcher Michael Thom, an associate professor at the University of Southern California’s Sol Price School of Public Policy, found limited benefits of the programs.

“The result was clear: entertainment incentives failed to attract a larger share of the industry, created few permanent jobs, and had no positive effect on state economies,” Thom wrote. “The subsidies ended up enriching movie industry moguls while doing little or nothing for state economies.”

Good Jobs First, a national watchdog that tracks incentive programs, has calculated the measly return on these subsidy programs. While their boosters will tout a wider economic benefit, researchers have found that the public recovers only a dime of every dollar committed to production companies.

“There’s a longstanding body of evidence from every credible neutral source that film tax credits are a very poor investment,” said Greg LeRoy, executive director of Good Jobs First. “They are negative returns on investments.”

‘Politicians love it’

Boosters will often point to Georgia’s film incentive program as a shining example of how the industry can boost a state’s economy.

Georgia’s tax credit program grew to a record $1.3 billion last year, making it the largest program in the country, Variety reported. The state’s program is not capped, meaning qualifying productions can qualify for a 30% break on in-state costs. Variety reported that the next largest incentive programs are in New York and California, where they are capped at $420 million per year.

Jeremy Hill, director of Wichita State University’s Center for Economic Development and Business Research, worked in Georgia years ago as the state got its film incentive program going.

There, it has spurred the growth of an entire industry. The backdrop for hit shows like “Ozark” and “Stranger Things,” Georgia is now home to suppliers that provide props, film equipment and vehicles for productions filmed there.

“That’s the problem with this. It’s already established now in Georgia. So trying to get a whole industry established in every single state does not make sense,” he said.

With more and more states adding these programs, Hill expects the competition will be fierce for states like Kansas.

Academics have largely panned film incentives as a waste of taxpayer resources, said Nathan Jensen, a professor of government at the University of Texas-Austin who researches economic development incentives.

Many film programs have gone down as net losers, meaning their costs outweigh the benefits. Those findings led some states to reexamine or downsize their film programs several years ago, Jensen said.

“I think if you had to ask experts on the topic, probably the two lowest value added types of programs you can have are stadium subsidies and film incentives,” he said. “They are at the absolute bottom in terms of the costs and benefits.”

As with other incentive programs, it’s unclear just how persuasive film incentives are for production companies. Jensen pointed to California’s program, which previously used a lottery system as it had more interest from companies than tax credits available to issue. Even companies who didn’t qualify for tax credits often continued to film in the state, he said.

“I think the hard part is they almost look all the same. So that’s the weird irony, right?” Jensen said. “It’s just hard to imagine adding a film incentive in Kansas, or Missouri, that looks like every other state film incentive program that’s going to really shape behavior.”

But he doesn’t question that film incentives do have a major following — among politicians.

After all, what’s flashier than having a major film or television show filmed in your backyard? Especially if it’s linked to a state program.

“Politicians love it, right? Even though every economist is shaking their head saying, ‘Oh, what a waste of money,’” he said. “They’re popular — They’re popular with the politicians at least.”