A film tax credit hands a producer cash back for a share of what they spend making the film, commonly about a fifth of the budget. In the UK, a producer who spends £1m gets roughly £200,000 back once they file the costs, before the film has even opened. That refund is large enough to decide where a film gets made, which is why a small state with no incentive of its own can go years without seeing a film crew.
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The credit works like a rebate on a very large receipt. Vermont is one of eleven US states with no production incentive, and Hollywood almost never comes. Even David Mamet’s “State and Main”, a satire set in a small Vermont town, was filmed in Massachusetts.
How the money actually moves
The UK’s version dates to a Budget change. Gordon Brown, then chancellor, raised the relief from 15% to 20% of production costs and had it paid straight to film-makers rather than sold on to banks and investors. Those middlemen had been taking a cut for financing films up front. Film minister Estelle Morris said routing the money directly meant it would reach producers rather than middlemen.
The UK still runs a version of that scheme. Chancellor Rachel Reeves increased the relief for independent films last year, framing it as support for jobs and growth. The credit can be offset against a production company’s tax bill or claimed as a cash lump sum.
Why the number is worth fighting over
A rebate near 20% changes the arithmetic of a budget meeting. A producer choosing between two locations with identical crew costs and identical scenery picks the one that hands back a fifth of the spend, because that fifth funds the next film. Once one jurisdiction offers it, a competitor without a matching credit is not competing on quality of light or crew. It is competing on a subsidy it does not have.
That is the argument Kelly Eastes makes for Wyoming, which dropped its film incentive in 2017 after it “just got political” and has struggled to attract productions since. “I think it would help us,” Eastes says of a proposed federal credit, arguing it would make Wyoming “at least a little competitive with other states.”
The number is also worth padding
A rebate paid against claimed costs only works if the claimed costs are real, and the UK system has been tested on that point. The Guardian examined the accounts of producer Alan Latham, credited on 81 releases since 1996, and found budgets filed with Companies House that ran far higher than the costs recorded in the films’ own production spreadsheets. For Love or Money reported a £4.3m budget and claimed £994,353 in tax credits, 23% of that figure, but an internal spreadsheet seen by the paper put the film’s actual total at £1.3m. Insurance records for the same film cited estimated production costs of £1.4m, a figure that would justify a credit closer to £280,000. A similar gap appeared on two more of Latham’s films, Gatecrash and Dark Encounter.
None of that changes the incentive itself. It shows what happens when a subsidy is paid on the honour of a spreadsheet: the same mechanism that gets a small film made can also be the easiest number in the room to inflate.
Why the US is now asking Washington
State incentives have driven US location decisions for about 25 years, but the industry now argues that state money alone cannot keep productions from moving abroad to the UK, Canada, Australia and elsewhere in Europe, where incentives are more generous. Los Angeles has lost more than 50,000 production jobs since 2022, and the Motion Picture Association is lobbying Congress for a 20% federal labour credit that would stack on top of whatever a state already offers.
The pitch to Republican lawmakers skips Los Angeles entirely. Producer Chris Fenton has taken the case to right-leaning podcasts, arguing the credit would help red states such as Kentucky, Louisiana, Texas and Tennessee as much as the traditional production hubs. Representative Brian Jack, a Georgia Republican who visits film sets in his own district, is said to be pushing for the plan.
What decides the next location
A tax credit only moves a shoot if the difference between two locations is otherwise close. A script set in New York still needs New York streets. But a soundstage scene, a generic small town, or a story that never names its setting can go anywhere with power, crew and a permit office, and the rebate is what breaks the tie. Places without one are left making the case that Brian Carroll, who promotes Vermont’s locations as a volunteer, makes for a federal credit: not a seat at the table, but a chance to get into the room.
