Federal Film Tax Credit Could Cost Up to $50 Billion

By Adam N. Michel of Cato.

"After President Trump’s endorsement, a bipartisan, bicameral group of lawmakers recently introduced the Motion Picture, Television, and Entertainment Revitalization Act. The bill would create the first direct federal subsidy for Hollywood movie studios through a tax credit covering 20 to 30 percent of what film and TV productions pay their workers. 

Dozens of states and countries have experimented with subsidies for the film industry. The overwhelming evidence is that the subsidies mostly don’t create new production, don’t meaningfully increase jobs or wages, don’t build an industry that survives without the subsidy, and are fiscally costly. 

Using the film industry’s own analysis of the newly proposed federal film tax credit, I estimate the program could cost between $33 billion and $49 billion over ten years. That works out to between $54,000 and $81,000 for each additional industry job. Under less optimistic assumptions, the cost per job could rise to as much as $125,000. 

State and International Film Subsidies Don’t Work 

Today, 39 US states, Washington, DC, and Puerto Rico offer film incentives. Patrick Button investigated these state programs and found that adopting one increased the number of television series in the state by at most 1.5 series. He found no meaningful effect on feature films, employment, wages, the number of businesses in the film industry, or businesses in related industries. Professor Michael Thom finds that, between 1998 and 2013, state film incentives did not raise the industry’s share of the economy or its concentration in the state.

Another journal article found that film incentives can attract movies but found no strong evidence that they create a permanent movie industry in the state. A study of California’s film credit lottery similarly found that receiving a subsidy increased the probability that a film would be made in the state by 16 percentage points. However, the California Legislative Analyst’s Office concluded that even with the increase in production activity, “there is weak evidence that expanding the tax credit would benefit California’s economy as a whole.” It concluded that expanding the credit only makes sense if preserving Hollywood’s market share is treated as an end in itself. 

The conclusion in California matches similar academic research. John Charles Bradbury looks at US state economies over a period when film incentives were being adopted, suspended, and repealed. He finds no evidence that film incentives have a positive impact on state economies. A Canadian cost-benefit analysis similarly concludes that, despite increased employment in the film industry, the film incentives made Canadians poorer overall, as the increase comes at the expense of economic activity in other sectors of the economy. In a similar cost-benefit analysis, Ireland’s Department of Finance estimated its film incentive resulted in a €72 million net cost to Irish society in 2016. 

The most favorable academic work examines the early film incentive-adopting states of Louisiana, New Mexico, and Rhode Island, finding real gains in wages and employment. However, the same research finds that film employment and wages fell in states that later repealed or capped their programs. This shows that tax credits don’t build self-sustaining industries; they build industries that exist only to collect taxpayer subsidies. 

Louisiana provides anecdotal evidence of how fragile a subsidized industry is. In 2015, the state capped how much in credits it would pay out each year and temporarily suspended its buyback of credits. The state’s economic development agency data indicate that film business fell by about 75 percent. Again, amid uncertainty over repeal and reform in 2024 and 2025, production in the state fell to a single active project in May 2025. It rebounded after lawmakers increased the subsidy amount that any single production can claim, showing the fragility, high costs, and dependence film subsidies create. 

The positive assessments of film incentives almost universally come from industry-funded studies that rely on unrealistic assumptions. For example, a series of Ernst & Young studies concluded that film subsidies pay for themselves, returning as much as $1.90 in new revenue for every dollar subsidized. In a review of 29 assessments by independent government agencies in 23 states, Professor Thom found all but one cost the state more than it returned in new revenue. 

Federal Film Tax Credit Could Cost Billions a Year

The Hollywood subsidy bill is led by Sen. Tim Scott (R‑SC) and Rep. Nathaniel Moran (R‑TX) and joined by Adam Schiff (D‑CA) and Linda T. Sánchez (D‑CA), among others. It would create a new federal tax credit for 20 percent of a qualifying production’s labor costs. The credit could rise to as much as 30 percent with bonuses for filming in rural opportunity zones or disaster areas, for independent productions, for spending across many states, and for increasing the number of domestic productions. The credit is transferable, so a production with little or no federal tax liability can sell it for cash to a company that has federal tax liability to offset.

Relying on a study commissioned by the Motion Picture Association (MPA), supporters claim the new federal film subsidy could create nearly 145,000 new jobs a year and $250 billion in new economic value added between 2027 and 2035. 

Using the study’s own assumptions, I estimate the new federal film credit could cost between $3.3 billion and $4.9 billion per year, or up to $49 billion over a decade. The low end assumes every project claims the lower 20 percent credit, and the high end assumes all qualifying compensation receives the maximum 30 percent credit. The bill has no per-production cap, no limit on star salaries, and no cap on total cost. 

At the high end, this new subsidy would spend as much subsidizing Hollywood movie studios as the National Park Service spends each year, at about $5 billion in annual budget authority.

The MPA estimate rests on several strong assumptions, including that without a federal subsidy, the US share of global TV and movie film production will fall below 30 percent, a decline of 13 percentage points for TV and 9 percentage points for movies, by 2035. With the credit, it assumes the US share rises to 65 percent, a significant change in both level and trend.

The study’s model also assumes no supply constraints for labor or other inputs and does not account for economic activity displaced elsewhere in the economy. To the extent the subsidy actually creates new wages, higher federal income and payroll tax receipts would offset some of the credit’s gross cost. But the empirical research surveyed above on film credits suggests that much of the apparent job creation reflects workers shifting between industries rather than net new employment. Excluding those assumed economy-wide spillovers, the study’s own model implies about 60,600 additional full-time-equivalent annual jobs directly in the film industry. 

The $3.3 billion to $4.9 billion in new subsidies works out to between $54,000 and $81,000 a year for each additional full-time film industry job the MPA claims would be created. Because the credit would be primarily used by productions already filming in the United States, the fewer new jobs created, the more costly each additional job becomes, even as the total cost of the program falls. If the credit brings in half the new jobs and production expenditures the MPA assumes, the cost per additional job rises to about $83,000 on the low end and $125,000 on the high end. This range is consistent with a 2016 Massachusetts Department of Revenue evaluation finding that the state’s film incentive costs $109,762 per new Massachusetts resident job created. 

Film industry jobs are also not low-wage jobs. The MPA study estimates that film and television production jobs pay about 50 percent more than the comparable national average. Higher-wage and higher-skill workers also tend to have more employment options, strengthening the empirical finding above that subsidies largely pull these workers away from unsubsidized productions and other industries.

Hollywood’s problem is not a shortage of subsidies. Thirty-nine states and dozens of countries already pay studios to little effect. A new federal film tax credit would primarily put taxpayers on the hook for multimillion-dollar Hollywood studio productions that would have largely been filmed here anyway. Congress should protect taxpayers from subsidizing Hollywood by rejecting the federal film credit, and states should repeal their programs, too. If filming in the United States costs too much, the answer is lower taxes and easier regulations for all businesses, not billions of dollars in subsidies for a single industry. 

Notes: The labor cost estimate follows the report’s assumption that 53 percent of the $277.5 billion in total industry spending is labor costs and assumes that all domestic labor income qualifies for the credit. The figure for industry jobs created applies the 2.33 employment multiplier and 0.919 full-time equivalent conversion ratio to the study’s 153,700 reported total annual jobs."

Single-Family Homes Are the Largest Source of Affordable Rentals in the United States

By Arthur Gailes & Edward J. Pinto of AEI.

"Myth: Affordable housing is popularly conceived as primarily consisting of subsidies for people living in apartment buildings.

Market Reality: Nationwide, most of the least expensive rental housing comes from single-family 1-4 and mobile/manufactured homes.

Fifty-five percent of the people paying these least expensive rents live in single-family homes (1-4 units) or mobile homes, not in multifamily buildings.

That distinction between homes and people matters. Single-family homes have far more bedrooms on average—about 3.2 nationally, compared with 1.4 for large multifamily buildings. So even where multifamily buildings provide a large share of low-rent units, single-family homes can still house more of the people benefiting from least expensive rents.

This story holds true throughout the country. In a high-priced metro like Los Angeles, most of the least expensive rental units (54%) are multifamily. But most people (53%) in these units live in single-family 1-4 and mobile/manufactured homes.

The reason is mostly bedrooms. People, when they get together to form households, disproportionately live in single-family homes because they have the most affordable space. Most people live in homes with at least two bedrooms, and that is just as true for people with low incomes as it is for people with median or high incomes."

"Across most metros in the country, once we look at the population living in the least expensive rental units rather than simply counting rental units, single-family homes provide most of that housing (green).

The counterintuitive result is that not only do single-family 1-4 and mobile homes constitute the largest source of affordable rentals in the United States, but policymakers and voters should be skeptical about narratives that treat single-family rentals as a source of housing-cost problems. This includes animosity towards institutional investors. The homes that are most affordable for families to rent are disproportionately single-family 1-4 and mobile/manufactured homes."

Does Costco Cause Cancer?

By Alex Tabarrok.

"In December 2025, researchers led by Yazan Alwadi at Harvard’s T.H. Chan School of Public Health published a paper in Environmental Health that claimed to find that cancer incidence increased for people living closer to nuclear power plants in Massachusetts. In March, the same researchers published an expanded nationwide study claiming a similar result—this time looking at cancer mortality rates, rather than incidence—in Nature Communications. This was followed by a paper in the Journal of Exposure Science & Environmental Epidemiology that looked at associations of lung, breast, and colon cancers. Most recently, a study of total mortality, not just cancer, was published in the European journal Environmental Epidemiology.

The problem? Using the same methods pretty much everything causes cancer. An amazing takedown from Deric Tilson and Adam Stein:

For instance, living near a private four-year university is associated with a 15-fold increase in cancer mortality when compared to living near a nuclear power plant.

Costco has the largest effect of all the locations we have tested. Over 2.2 million cancer deaths can be attributed to Costco; that’s more than 20% of all cancer deaths between 2000 and 2018. Hot dogs, bulk spices, and reasonably priced clothes come with a cost.

What went wrong?

[The authors] chose nuclear power plants because a story could be built around that framework. When the researchers got positive results across our nation’s nuclear power plants, they didn’t check what their shiny new methodology would do using other landmarks. This is their pitfall: by taking the easy way out—getting results and making up a story around those results without double-checking their method—the authors could have no idea that what they were actually capturing was the methodology itself.

…The attributable number of deaths from this methodology is probably zero, but the attributable number of bad papers is at least four."

Here are two more excerpts from the Deric Tilson and Adam Stein paper:

"But proximity is not exposure. We have methods of measuring exposure for nuclear power plant workers. While the radiation exposure of nuclear workers will always be greater than or equal to that received by the surrounding public, most of the closely monitored US nuclear workforce receive no measurable annual dose. When workers are exposed to radiation, the average dose received is only 2 percent of the occupational limit. If operators and workers who are on-site at nuclear power plants receive an annual dose between zero and one-fiftieth of the occupational limit, how is it possible that residents 5, 10, 25, 50, 120, or 200 kilometers away would receive any measurable dose from the same plant?"

"In our original rebuttal, we remarked that the studies can’t prove their assertions because they lacked proper control. It seems they also neglected to do any placebo testing. They chose nuclear power plants because a story could be built around that framework. When the researchers got positive results across our nation’s nuclear power plants, they didn’t check what their shiny new methodology would do using other landmarks. This is their pitfall: by taking the easy way out—getting results and making up a story around those results without double-checking their method—the authors could have no idea that what they were actually capturing was the methodology itself. In our replication and expansion, we have shown that choosing a number of sites and landmarks from capitals to warehouse stores can all yield a positive result without any reasonable pathway for American citizens to become exposed to radiation, develop cancer, and then die. The variations are random noise, all sloping in a positive direction. Even when using randomized outcomes, the methodology outputs positive results.

The papers by Alwadi et al. don’t show a novel mechanism by which nuclear power plants meaningfully contribute to cancer mortality; instead, they show an association of data points across 400 km-wide circles. 48,519 square miles, about the size of Mississippi, is a massive area to claim any kind of exposure. Most studies measuring distance-based exposures look at much smaller distances, such as under 10 km (an area of 113 square miles). The methodology is blind, which can be a feature in research areas needing to avoid bias, but in this case it is a bug; it doesn’t understand radiation exposure or dose. All it understands are its inputs: coordinates, proximity, covariates, and cancer deaths. From these, it can give you a number and even a positive result, but it cannot explain why that result exists. It is still an ecological study, one with a sophisticated statistical technique, but not a very useful one."

Justin Wolfers Recognizes His "Libertarian Friends Were Right" About Government Power

Wolfers is the latest of several prominent left-liberals to make similar admissions.

By Ilya Somin. 

"In a recent post, prominent left-liberal economist Justin Wolfers (University of Michigan) concedes that his "libertarian friends" were right about the dangers of government power:

My libertarian-leaning friends have consistently argued against a powerful federal government in favor of individual freedoms. I had — somewhat naively — never taken their views seriously enough. My friends who worked in government were good people, I reasoned, and surely that's true more broadly.

But I've had to admit to my libertarian friends that they were right. Concentration of power can be abused. We're seeing it happen right now.

Last year, I wrote about similar admissions by two other prominent left-of-center figures: famed legal scholar Cass Sunstein and economic policy commentator Noah Smith. I commend Wolfers and the others for being willing to admit error and learn from it. All too many intellectuals and political commentators never do. I am a longtime fan of Wolfers' writings, and now am even more of a fan than before.

It is often the case that people become more aware of the dangers of government power when that authority is wielded by their political opponents. Even some libertarians tend to ignore or overlook abuses of power when perpetrated by the side of the political spectrum they identify with. The Trump era has been a particularly significant wake-up call for some on the left, because he has engaged in so many abuses, especially in his second term.

But it is important to recognize that the problems here are systematic, not confined to the misdeeds of any one politician, even one so egregious as Trump. As James Madison famously warned, "[e]nlightened statesmen will not always be at the helm." Distinctly unenlightened demagogues like Trump all too often reach high political office. That's in large part because voters often do a poor job of choosing leaders, thanks to widespread political ignorance and bias. Trump's return to power in 2024 showed that these problems are even more severe than I had previously thought.

Wolfers adds that his newfound appreciation for libertarian concerns have made him "more small-c conservative":

The old conservative idea was that we have rules of the game that have served us well for generations. We should be slow to change them. Our children should be handed the same set of opportunities we had, if not better ones.

I only partially agree. Where established institutions constrain government power and protect liberty, we should indeed conserve them. But, in too many ways, those safeguards have been eroded over the last 100 years or more, thereby creating the very dangers of abusive government power that Wolfers rightly decries. To fix that, we in some instances need to restructure the current "rules of the game," and impose much tighter constraints. For example, we should roll back federal power to impose immigration restrictions (which was not part of the original Constitution), and have much stronger enforcement of constitutional constraints on delegation of legislative power to the executive. The growth of delegation and federal immigration powers is at the heart of the many of the worst abuses of the Trump Administration, and creates severe problems even under more conventional administrations.

Similarly, the growth and institutionalization of government control over land use is at the heart of the housing crisis that besets many parts of the US. We should roll that back too, in part by enforcing federal and state constitutional protections for property rights.

Elsewhere, I have explained how these issues and others like them can be the basis of a useful alliance between libertarians and "abundance liberals" (see also my exchange with Matt Yglesias on that subject). I suspect Wolfers may be sympathetic to the abundance liberal movement.

We're not likely to agree on every issue. But there is enough consensus to enable some useful cooperation between these groups. At the very least, we have common enemies in the form of two prominent political movements that very much don't appreciate the need for significant constraints on government power: MAGA nationalists on the right, and "democratic socialists" on the left." 

The Limited Efficacy of Social Media Bans for Teens

From Jeffrey Miron.

"The Jonathan Haidt-pilled among us shouldn’t celebrate Australia’s social media ban for teens just yet.

New evidence suggests that the ban has neither gotten teens off social media nor changed the culture around its use.

The ban

imposed few practical costs on teenagers who wanted to continue using social media: 75 percent described circumventing the restrictions as easy or very easy. … Among teenagers still using banned platforms, 52 percent gave a social reason, most often that their friends were still on the platforms or that they feared missing out.

The collective action problem remains and

the existing adherence rate may not last. On average, affected teenagers said that roughly two-thirds of their peers would have to adhere before they would adhere themselves. Yet they believed that only about 30 percent of their peers were adhering, close to our estimated rate of 27 percent. … Unless enforcement or social norms changed, we therefore expected adherence to decrease rather than increase.

Alternative

approaches include coordinated time limits, … campaigns that make nonuse visible and socially rewarded, incentives for reduced social media use, and organized activities that replace time and interaction lost online.

Of course, teens will likely find reasons and ways to circumvent these policies as well."

Billionaires are consistent with the institutions that underlie economic prosperity.

See Billionaires by Tino Sanandaji & Peter T. Leeson.

"Existing studies of entrepreneurship focus on entrepreneurs whose individual contribution to wealth creation is typically trivial: self-employed persons. This article investigates entrepreneurs whose individual contribution to wealth creation is enormous: billionaires. We explore the relationship between economic development, institutions, and these contrasting kinds of entrepreneurs. We find that the institutions consistent with self-employed entrepreneurs differ markedly from the ones consistent with billionaires. Further, only the latter are consistent with the institutions that underlie economic prosperity. Where well-protected private property rights and supporting, market-enhancing institutions flourish, so do billionaires. But self-employed entrepreneurs do not. Where private property rights are weakly protected and interventionist institutions flourish, so do self-employed entrepreneurs. But billionaires do not."

Public Sector Unions Undermine Accountability

Research on schools, policing, and government spending is clear: public sector bargaining forces taxpayers to finance the erosion of their rights.

By Jason Sorens of AIER. 

"This November, Vermont will vote on Proposal 3, a legislatively referred constitutional amendment to entrench collective bargaining rights in the state’s constitution. If it passes, the Vermont legislature would be barred from adopting any law that “interferes with, negates, or diminishes the right of employees to collectively bargain with respect to wages, hours, and other terms and conditions of employment and workplace safety.” 

The most immediate impacts of Proposal 3, if it passes, would be to authorize unionization for farmworkers and supervisors, the two categories of employees currently exempt from collective bargaining under state and federal law, and to effectively end the ability of the legislature to limit the scope and terms of public sector collective bargaining. The latter change is an especially big problem, because a growing body of evidence demonstrates that public sector collective bargaining undermines accountability to taxpayers and users of public services.

Take public education. Teachers unions exist to promote the interests of teachers, not students, and their activities have damaged school performance and raised costs for taxpayers. Sophisticated empirical studies have repeatedly confirmed these findings.

Stanford economist Caroline Hoxby used state “duty-to-bargain” laws as an instrument to predict the timing and geographic scope of collective bargaining in K-12 education. She found that collective bargaining increased per-student spending but also increased the high school dropout rate, especially in places where there is less competition among public schools.

Political scientist Terry Moe examined “restrictive” collective bargaining contracts in California and found sharply negative effects on student test scores in larger districts. The negative effects on performance were most pronounced for minority students. “Restrictive” contracts are ones that provide due-process protections against firing bad teachers, limit the role of merit rather than seniority in determining assignments, promotions, and layoffs, and cap work and training hours.

A recent national study of the effects of duty-to-bargain laws in the prestigious American Economic Journal: Economic Policy found that the laws had long-term harmful effects on the labor-market success of men who were students at the time that these policies were enacted, with total negative effects on earnings of more than $200 billion every year.

It’s important to acknowledge that one of the authors of that study previously found null effects of union certification elections in Iowa, Indiana, and Minnesota on per-student spending and dropout rates. It could be that effects differ across states or in the long run versus the short run. That’s the reason why social scientists say “read literatures, not papers.” The overall evidence on public sector unionization is firmly negative.

In general, unionization in public schools seems to reduce accountability to parents. School district unionization rates predicted longer school closures during the COVID pandemic, resulting in massive and possibly irreversible learning loss. More unionized schools were less likely to require teachers to teach in person during the pandemic. Stronger unions are associated with fewer effective literacy programs — though this relationship is a rough correlation, not a sophisticated study.

Public safety is another area where collective bargaining has proven harmful. Union contracts frequently shield police from legitimate accountability. Collective bargaining contracts include “delay privileges” that require investigators to wait a certain period before interviewing a police officer who engaged in the use of force. These delay privileges obstruct investigations, reduce the odds that officers face internal discipline, and normalize the excessive use of force.

According to a survey by law professor Stephen Rushin, a whopping 88 percent of police union contracts contain at least one provision that could thwart legitimate disciplinary action, such as mandatory destruction of disciplinary records, bans on civilian oversight, prohibitions on anonymous civilian complaints, and time limits on internal investigations.

Collective bargaining rights increase police misconduct. That’s the conclusion of an empirical study that leveraged a 2003 Florida Supreme Court decision expanding collective bargaining to sheriffs’ deputies. After the change, there was a substantial increase in reports of “violent misconduct” by sheriffs’ offices relative to police departments.

The negative consequences of collective bargaining for the taxpayer are also evident in police and firefighter contracts, according to a causally identified study in the ILR Review. Collective bargaining substantially increases firefighter pay and more modestly increases police pay and reduces their workweek. A well-designed synthetic control analysis published by the Heritage Foundation found that collective bargaining increases the cost of government on average across the US by about $600 to $750 per person per year.

Why are public sector unions so harmful? The biggest reason is that unions are often on both sides of the negotiating table. They fund politicians’ campaigns and lobby them for favorable legislation. In low-turnout local elections, they can be the dominant force. So it’s no surprise that local elected officials give the unions exactly what they want.

The science is clear: public sector unions are bad for taxpayers and the people they are supposed to be serving and protecting. Abolishing public sector collective bargaining is necessary to make government a servant of the people, rather than its master."