Thanks to new but controversial tax breaks, 2011 was a marquee year for North Carolina's film industry, which landed big-name projects "Iron Man 3," "Homeland" and "Hunger Games."
Bringing red-carpet stars Robert Downey Jr., Claire Danes and Jennifer Lawrence, studios chasing tax incentives increased their spending in North Carolina nearly threefold — from $75 million in 2010 to $220 million in 2011.
It was a record year, and 2012 should be even better — the N.C. Film Office is projecting the industry will spend at least $275 million.
A year ago, state law changed so moviemakers could get a refund on 25 percent of salaries and money they spent on taxable items in North Carolina, worth up to $20 million per project. It made the state among the most competitive in the nation in tax breaks for the industry.
But even with the investment windfall, Hollywood tax breaks remain an issue. Some states, such as South Carolina and Michigan, have cut back on incentives. Even in North Carolina, some ask why the entertainment industry should get special treatment.
Studies have shown that tax breaks to Hollywood aren't always good business, says Mark Robyn, an economist for the Washington-based Tax Foundation.
A study released by the foundation in 2010 found that 44 states offered movie production incentives, up from five in 2002.
"Competition among states transfers a large portion of potential gains to the movie industry, not to local businesses or state coffers," the report concluded. "It is unlikely that movie production incentives generate wealth in the long run. Most fail even in the short run."
North Carolina, watching its film business decline, started offering incentives in 2007.
A fierce legislative debate has been held in Raleigh in recent years over increasing film incentives. "We're subsidizing superstars," complained Rep. Paul Luebke, D-Durham.
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