Hollywood studios vying for taxpayer money often run up against a fundamental problem when trying to convince the public to support their efforts: Their math simply doesn’t add up. 

Earlier this week, The Nevada Independent reported on two reports commissioned by the Nevada Governor’s Office of Economic Development that describe plans to expand Nevada’s film tax credit program as economically “unsustainable.” The reports, authored by the consulting firm Applied Economics, concluded that Nevada would likely see “a negative return on investment for every dollar invested by the state.”

As one of the reports noted, those results are “significantly different” than the overly rosy projections made by industry groups lobbying for an eightfold increase in the state’s film tax credits. 

Of course, fuzzy math is nothing new to the world of lobbying — nor is it a foreign concept for Hollywood. Movie studios have long engaged in what one judge described as “unconscionable” accounting methods to hide profits and avoid having to share their corporate revenues with everyone from writers to actors to government coffers. 

For example, the Warner Bros. blockbuster Harry Potter and The Order of the Phoenix grossed nearly $1 billion worldwide in 2007 — and yet, thanks to accounting trickery, it was officially reported to be $167 million “in the red” years later, according to net profit statements. 

And that’s not an isolated incident. 

As The Atlantic reported back in 2011, the 1983 film Return of the Jedi grossed $475 million on a $32 million budget, but was also declared a fiscal loss on paper. Forrest Gump suffered from similar “Hollywood accounting,” as did Sony’s 1997 blockbuster, Men in Black. Neither of those movies have, apparently, ever made a “profit,” despite massive gross receipts.  

Those supposed losses — which really only exist on Hollywood spreadsheets — have a handy cost-saving impact on studios. Because some stakeholders such as writers or even actors are paid a portion of profits, if there are no “profits” reported, there’s nothing for studios to share. The actor who played Darth Vader in the final installment of the original Star Wars trilogy, for example, was never paid any “residuals” due to the movie’s ostensible lack of profitability. 

Such nonsensical financial scheming is known as “Hollywood accounting” in the industry, and it has long been common practice. However, it’s not used exclusively to cheat actors, writers or stakeholders out of their share of a project’s success. A similar version of fictitious fiscal trickery is regularly deployed by the industry to convince lawmakers into letting movie studios raid public treasuries as well. 

Virtually every attempt to expand tax credit programs is promoted as some potential economic windfall for local communities, with industry lobbyists insisting taxpayer-funded handouts will somehow generate untold regional prosperity. 

Real world data, however, indicates that the more pessimistic projections of Applied Economics’ independent analysis are far more in line with likely outcomes.

Georgia’s massive tax credit program, for example, has failed to generate substantial economic gains for local residents, despite more than $1 billion per year going to the production companies. Georgia State University's Fiscal Research Center found in 2023 that the credits in the Peach State not only negatively affected overall job creation but also ended up costing taxpayers for each industry-related job that was created. 

That’s one heck of a burden placed on taxpayers for the sake of having “Made in Georgia” included in a production’s credit sequence. 

Elsewhere, the real-world economics of film subsidies are similarly dismal, which is why most serious economists caution against such “economic development” schemes — especially at a time when government is already likely to struggle for adequate revenue thanks to erratic and harmful headwinds coming from the national level. 

With tariffs and prolonged economic uncertainty plaguing the national economy, is doling out tax dollars to already profitable corporations really the best use of scarce public resources in Nevada? 

Proponents of the tax credits, however, argue that creating a Hollywood 2.0 somewhere in Las Vegas would protect against such economic hardship as it would diversify our regional economy. And while that narrative is certainly enticing, real world data and independent analyses clearly suggest otherwise. 

After all, how many other cities, states and even foreign jurisdictions have been promised they’d soon become the “next” Hollywood in exchange for millions of dollars from government treasuries? From Texas to Toronto, the industry routinely promises it will bring the glamour and prosperity of Hollywood to local communities in exchange for massive subsidies. 

And yet, widespread economic benefits simply never materialize in full, if at all, after the public money is doled out.   

The idea that the industry’s lobbying efforts in Nevada have similarly relied on overly optimistic rhetoric and economic projections shouldn't be surprising. In much the same way that studios have used fuzzy math to withhold residual checks from actors, it relies on fuzzy economic projections to extract wheelbarrows full of cash from local governments. 

It’s just another form of “Hollywood accounting” — and like a Star Wars movie or Harry Potter sequel, the only entities poised to benefit financially are the studios and lobbyists putting together the spreadsheets.

Michael Schaus is a communications and branding expert based in Las Vegas, Nevada, and founder of Schaus Creative LLC — an agency dedicated to helping organizations, businesses and activists tell their story and motivate change. He has more than a decade of experience in public affairs commentary, having worked as a news director, columnist, political humorist, and most recently as the director of communications for a public policy think tank. Follow him on Twitter @schausmichael or on Substack @creativediscourse.