Hollywood seeks more taxpayer subsidies

May 23, 2012

By Joseph Perkins

The California Film Commission is holding a lottery next week for filmmakers and television producers. The lucky winners will share $100 million worth of taxpayer subsidies.

It’s part of the state’s three-year-old Film and Television Tax Credit Program, the purpose of which is to prevent rival states from luring productions away from Hollywood.

Since the program’s inception, tax credits have gone to some 165 productions, according to Amy Lemisch, the Film Commission’s Executive Director. Those “incentives” have generated nearly $3 billion in spending here in the Golden State, she said, and created nearly 30,000 jobs.

The Film Commission is hopeful that the Legislature will approve a bill, introduced by Assemblyman Felipe Fuentes, D-Sylmar, which would extend the tax credit program, scheduled to expire next year, until 2018.

The measure passed the Assembly Revenue and Taxation Committee last week. It remains to be seen if it ultimately finds its way into the state budget the Legislature sends to Gov. Jerry Brown.

Tax Credit Program Does Not Reap Promised Benefits

Lawmakers just might consider the tax credit a luxury the state treasury simply cannot afford, giventhe $16 billion state budget deficit.

And especially considering a recent report by the UCLA Institute for Research on Labor and Employment suggesting that the $100 million-a-year state giveaway does not yield the payoff claimed by Lemisch and other less-than-objective boosters.

The report, authored by Lauren Appelbaum, Chris Tilly, and Juliet Huang, studied the economic and production impact of the state’s film and television tax credit. It concluded that the return on the Hollywood subsidy program is, at best, an economic wash for the state.

According to the report, in order for the state to break even on the tax credit, at least 88 percent of productions applying for but not receiving the credit would have to film outside of California. But of the sample the authors studied, 36 percent of productions passed over for state tax credits nonetheless filmed in California.

That’s because, while film and television producers are only too happy to take state subsidies, the handouts are not the lone determining factor in where motion pictures and TV shows are made.

Other important factors cited by the report include production crew depth and quality, technological expertise and a critical mass of production and postproduction facilities.

That echoes a 2010 report prepared for the Los Angeles Economic Development Corporation by the Kyser Center for Economic Research that listed those factors, as well as California’s unique confluence of well-regarded film schools, entertainment community and film industry suppliers.

All of those factors work in California’s favor, wrote UCLA’s Appelbaum, Tilly and Huang, and tend to keep film and television here in Golden State.

There is one tangible benefit of the film and TV tax credit, at least at the margin: and it helps to offset the high cost of doing business in California, includes state and local taxes, labor costs and regulation.

However, if the cost of doing business in California was average for the 50 states — rather than ranking worst among the states — it would have far more impact than tax credits on the share of films and TV shows produced in California, compared to other states.