SAG-AFTRA actors and Writers Guild of America (WGA) writers walk the picket line during their ongoing strike outside Walt Disney Studios in Burbank, California, U.S., July 31, 2023. Acquire Licensing Rights
NEW YORK, Aug 22 (Reuters Breakingviews) – Florida Governor Ron DeSantis may have been politically foolish for picking a battle with Walt Disney (DIS.N), but economically speaking, he was on to something. The $157 billion entertainment company’s sweetheart treatment is unfair. And even in similar instances that are more reasonable, the municipalities governing the companies often don’t gain much from offering incentives.
Disney received special status in 1967 after it agreed to help drain the Florida swamp, literally, and build an entertainment park in exchange for special designation. The deal gave Disney the ability to oversee its own district, which meant that it could, among other things, levy extra taxes on others in the area to pay for its own capital improvements. That favorable treatment lasted all the way up to 2022, when former Disney boss Bob Chapek spoke out against Florida legislation that banned discussion of gender and sexuality in classrooms. DeSantis seized on the remarks, and with Florida lawmakers earlier this year, took control of the special board.
Last week Disney filed a counterclaim to regain control. As that drags on, DeSantis continues to poll terribly against Republican presidential contender and former U.S. President Donald Trump for the nomination. Part of the problem might, in fact, be the Disney kerfuffle. Over half of Republican primary voters believe that government should stay out of deciding what corporations can support, according to a recent New York Times/Siena poll.
Still, questioning why the company deserves white glove tax treatment is a worthy one. Other companies like Comcast (CMCSA.O), which has a theme park in Florida, didn’t receive such incentives. And while corporations often receive tax breaks and incentives to move to states, Disney’s favoritism — Disney’s agreement was in perpetuity — looks egregious. Apple (AAPL.O) secured $846 million in subsidies to build in North Carolina. That lasted a long time — 39 years — but not forever. More recently Amazon (AMZN.O) won up to $750 million in subsidies in Virginia, but that was for just 15 years.
State and localities spend an estimated $95 billion annually on development subsides, and even with sunsetting incentives, their investment can go badly. A 1994 study by economist Timothy Bartik suggests that incentives are often revenue negative. Even when they work, they aren’t always slam dunks. North Carolina is expected to lose money on its deal with Apple. Florida’s own analysis in 2021 suggested that for every $1 break given to the entertainment industry, it receives just 7 cents back. DeSantis chose the wrong battle but the right war.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)
CONTEXT NEWS
Walt Disney on Aug. 17 filed a counterclaim against the Florida-appointed board that is now overseeing one of its theme park districts, Reedy Creek. The entertainment company is asking a judge for unspecified damages and wants the board to comply with development contracts between the special district and Disney.
In February, Florida lawmakers and Governor Ron DeSantis stripped Disney’s oversight of Reedy Creek, a special designation it has held since 1967 that allows the company to enforce business codes and provide emergency services.
In April, Disney filed a lawsuit against DeSantis and the board alleging the state took away its special status after Disney’s former chief executive criticized legislation banning classroom discussion of gender and sexuality.
Editing by Lauren Silva Laughlin, Sharon Lam and Aditya Sriwatsav
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