Recommendations for Georgia’s Digital Future

The case for continuing the tax incentive system unchanged

As the cost of content creation tax credits expands, a common reaction in states committed to build their creative sectors has been to rein incentive programs in by imposing a budgetary cap on potential outlays. But a simple cap on tax credit outlays suffers major drawbacks. Because it reduces the assurance of studio access to the incentive (after all, a given company cannot count on a tax benefit if a cap ends up reached early in a fiscal year cycle), a cap when applied in other states has tended to result in a major exodus—this was the experience in New Mexico and Florida, to take two recent examples. If an incentive or regulatory system is structured around uncertainty in this way, investors end up lacking the confidence they need to commit to Georgia projects, and even if the cap does not enact huge cuts, project work may flee the state because investors lack confidence in their ability to access the incentive mechanism.

Modifications of the tax incentive program

Some reforms of the tax incentive mechanism might facilitate Georgia’s further creative industries growth without scaring away producers and investors eager to work in Georgia. A better path is to raise access thresholds, implement more specific requirements so that the incentive remains open to all while not foisting ever growing costs on Georgia taxpayers.

For example:

The total project spend threshold could be raised to nudge higher the amount of Georgia spending in a qualifying project’s budget.

The credit could be modified to more fully reward projects that originated in Georgia, are post-produced in the state, or which employ a fully diverse workforce.

The top off 10% eligibility granted to qualifying projects that commit to Georgia branding could be reconfigured, so that benefitting studios could also commit to support Georgia workforce development programs or receive benefits by extending their work into rural areas.

The credit mechanism could be adjusted to more fully favor episodic television work. If a television series secures a distribution deal, the benefits of the production’s location in Georgia are more significant, since a successful television show might employ Georgians for five or ten years (as opposed to the much shorter timelines for film projects).

Tightening eligibility is not a risk-free approach to entertainment industry expansion. As tax credit qualifying thresholds are raised, smaller independent projects can be squeezed out, and these smaller projects may be the very thing Georgia would want to encourage (independent projects tending to engage more diverse voices, potentially linked to a wider narrative range than more predictable big budget fare). The current qualifying threshold implemented a compromise—it was set high enough to limit the incentive to serious and ambitiously budgeted project, but not so high as to be always out of reach for smaller companies (and the incentive enables studios to bundle projects together to reach the threshold). But if there is a strong political desire to limit the incentive’s costs, modifying qualifying thresholds might be worthy of consideration.

Other potential strategies to boost Georgia’s digital economy

Georgia should consider a tax incentive for entertainment production that is not content or project based, but which encourages the build-out of further studio and technology infrastructure that will benefit all creative projects, regardless of platforms. Media production is digitally intensive, requiring the ability to move and process large data files. An incentive that encourages Georgia-based studios or subsidiaries to expand digital and computational processing capabilities or that offsets initial studio construction is essentially a broad-based investment in Georgia light manufacturing. The logic of the current incentive is that support for specific projects will indirectly lure the expansion of production facilities, and that has happened. But the trend could be encouraged by directly supporting studio buildouts.