By Paul Gessing
Since the days of Bill Richardson’s Administration, the Rio Grande Foundation has opposed New Mexico’s generous film subsidies. Back in Richardson’s day the primary subsidy was a 25% “refundable” tax credit meaning that anyone filming in New Mexico received up to 25% of what they spent to film in the Land of Enchantment (courtesy of New Mexico’s taxpayers).
Gov. Susana Martinez attempted to rein in the subsidy program. Along with the Legislature she placed a $50 million annual spending cap on film subsidies. When Lujan Grisham took office, she paid out any accumulated debts incurred by the State, an estimated $300 million, and convinced the Legislature to expand the State’s subsidies to cover as much as 40 percent of filming.
With New Mexico politicians gorging on revenues generated by the oil and gas industry it looked like nothing would stop New Mexico’s ever-growing film largesse. Film remains far and away the State’s most subsidized industry. That is, until Hollywood and the broader film industry went into a recession (some would say depression).
The amount spent by companies filming in New Mexico has fallen from $740 million annually down to $323 million from July 2024 to June 2025. Industry insiders say this may be the “new normal.” They wonder if the industry will ever recover its former glory due to economic pressures and changing consumer tastes.
This is not an entirely bad thing for New Mexico. Study after study has found New Mexico’s film subsidy programs to be economic losers. New Mexico’s Legislature has been unabashedly pro-film-subsidy for decades but their own analysts at the Legislative Finance Committee reported in 2023, “film incentives are less effective at attracting private investment, cost more per job, and have a lower return on investment than other incentive programs.”
Economists in New Mexico and nationwide have come to similar conclusions. From that perspective, less filming means less subsidy payouts and less of a hit to the State budget, right? The answer is both yes and no.
For nearly two decades New Mexico’s political classes have approached Hollywood as “the next big thing.” Direct film subsidies are only one of many ways in which the industry has been able to suck in New Mexicans’ taxpayer dollars.
Take the case of Santa Fe Studios. The studios have been open since 2011 and were (like many aspects of New Mexico’s film industry) created through subsidies above and beyond the State’s 40% credit. According to the Santa Fe New Mexican, the “Studios received a $10 million grant…from the state, and (Santa Fe) County kicked in another $3.6 million worth of infrastructure improvements for the project. It also is guaranteeing $6.5 million worth of a $10 million loan the studio's principals secured from Los Alamos National Bank.”
That’s in addition to a $22 million Industrial Revenue Bond (IRB) which exempted the facility from property taxes.
Santa Fe Studios is hardly alone. New Mexico continues to pump money into other film-related programs like $40 million for the Next Generation Media Academy and millions of additional dollars supporting various film programs through the corporate welfare “LEDA” program.
Whether New Mexico’s film industry recovers in the future or not, there is a valuable lesson here for New Mexico policymakers.
Rather than lavishing subsidies and attention on specific industries New Mexico would be better off reducing tax burdens on all businesses in the form of tax cuts and gross receipts tax reforms. Improving the education system to train students to be critical and innovative thinkers (rather than training them for one industry) is also important. In other words, New Mexico should be an attractive place for all businesses, not just a chosen few.
Until voters demand that New Mexico policymakers enact better economic policies for all businesses big and small rather than handing hundreds of millions of our tax dollars to a few favored industries, we’ll continue to underachieve as a State.
Paul Gessing is president of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, nonpartisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.
