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Taxpayers shouldn't subsidize film business

February 23, 2000

Gerald R.Lampton

Scott Wildman's Economics is for the Birds

I take exception to Scott Wildman's contribution to the Community Forum,

'Let's Bring Hollywood Home.' (Feb. 17) Please, Scott, let's not.

Wildman advocates a 10% tax credit for the labor costs of below-the-line

workers in the film industry. But why should taxpayers provide a

protectionist subsidy to the film industry?

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The answer is, they shouldn't.

Film producers, driven by consumer demand for less expensive forms of

entertainment, are forced by the marketplace to obtain the best value for

their film production dollars. If they are forced to go to places like

Ireland and Canada to find the cheapest workers, it's because consumers

discriminate on the basis of quality and price - not national origin -

when deciding what films to watch.

If filmmakers were forced to hire only in Hollywood, the goal Wildman

apparently wants to achieve, it will raise the cost of entertainment to

consumers. As a result of the price increase, consumers who have to pay

more for entertainment would either buy less entertainment or less of

everything else.

Wildmans tax credit would try to avoid raising the cost of entertainment

by distributing the higher production costs among all those taxpayers who

are unlucky enough not to be able to take advantage of the tax subsidy

offered by his proposed credit.

It won't work because the same consumers who want to pay low prices for

entertainment are also the taxpayers who will have to pay higher taxes if

Wildman's proposal ever becomes law.

Whether by taking money out of consumers' pockets in the form of higher

prices or higher taxes, film production protectionism will cut off and

distort the signals that the market's pricing mechanism, when it

functions properly, sends to the owners of the various factors of

production, including owners of labor.

Over time this distortion will lead to misallocation of scare economic

resources and make consumers worse off. No matter how you package it,

film production protectionism is bad for consumers, which is to say it is

bad for everyone except the privileged recipients of the subsidy.

The absurdity and unfairness of Wildman's proposal becomes obvious when

one asks, 'Why is the film industry so special? Why not subsidize the

wages of, say, native born painters, day laborers or housing

contractors?'

After all, there's plenty of work to be done and plenty of foreign-born

laborers taking away the jobs of these people. Most of the people in

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