Arizona Advocates Question $125 Million in State Film Subsidies

Two Arizona groups are going to court to stop the state from allocating $125 million annually to Hollywood movie studios. They say this program breaks Arizona's constitution and wastes taxpayer money.

A legal battle started in January 2025 when the Goldwater Institute filed a lawsuit to stop the program. The Arizona Free Enterprise Club and Grand Canyon Legal Center are now joining the fight by supporting the lawsuit in Maricopa County Superior Court.

The Arizona Commerce Authority, which oversees the program, is fighting back and asking the judge to dismiss the case.

The groups say Arizona's constitution has a rule called the "Gift Clause" that prevents the government from giving taxpayer money to private companies unless the public receives something of value in return.

How Arizona Pays Hollywood

Arizona refers to these payments as "tax credits," but they function more like writing checks to movie companies.

• Movie companies receive a 15-20% refund of their production costs when they film in Arizona. If they spend more money (up to $35 million), they get a higher percentage back.
• Companies can receive an additional 7.5% refund if they meet specific requirements.
• When a film studio receives more credits than it actually owes in taxes, Arizona sends it cash to make up the difference. This means taxpayer money goes directly from the state treasury to Hollywood studios.
• To qualify, movies must be filmed primarily in Arizona and utilize local facilities for editing and other post-production work.

The groups question whether Arizona residents get enough benefits from this program. Movie supporters argue that it generates jobs and economic activity in the state. This is why sometimes you might see "filmed in Arizona" at the end of a movie.

However, the conservative groups argue that these benefits are too small and unclear to justify spending $125 million of taxpayer money each year.

The Issue

Scot Mussi, President of the Arizona Free Enterprise Club, explained that "Arizona taxpayers should not be forced to bankroll Hollywood studios.”

"These subsidies are unconstitutional, unfair, and ineffective. Arizona's Gift Clause was written to stop this very abuse, and we are confident the courts will strike it down," he continued.

The critics include other political figures, such as Senate President Warren Petersen, who also oppose the program.

The groups compare this to old problems when cities went broke paying for railroad and canal projects that mostly helped specific businesses instead of everyone.

The organizations say they're not against all tax breaks. Their problem is specifically with programs that write actual checks to companies, rather than just reducing the taxes they owe.

If the groups win their lawsuit, Arizona would have to stop its movie subsidy program. This could also affect other programs where the state pays private companies with taxpayer money.

The court case is still ongoing, and Judge Adele Ponce's decision will determine whether the program can continue.