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.

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  1. Ulysses Uhaul
    Ulysses Uhaul 23 May, 2012, 08:11

    Should progressives kneal at the boots of politicans begging for tax/fee cuts after they have supported politicans bent on ruining California businesses with taxes, regulations, fees and negative public relations.

    Strange!

    Reply this comment
  2. Beelzebub
    Beelzebub 23 May, 2012, 08:14

    Why wouldn’t the Sactown clowns and the Hollyweird pigs be tied at the hip? Both are two of the most dysfunctional professions that we have in our society. Just read the headlines if you question that. And both have done MORE DAMAGE to the sanctity and integrity and morals of this country than any other professions. You don’t think that the peasants live vicariously though Hollyweird movies??? heh. This has been proven though peer-reviewed psychological studies. Show a child a film of children acting aggressively toward one another and roughhousing – and that child will run out and MIMIC what he just saw on the film. It’s no different with adults. Humans are sheep. Why do you think we have so much violence in America? One reason is that Americans have been desensitized to it as a result of Hollyweird productions. You’ve heard the old saying “Monkey see monkey do”? It could not be truer.

    So it is not shocking to me that the two most dysfunctional groups of people in America are in bed together. In fact, to me it only makes perfect sense! 😀

    Reply this comment
  3. Rex The Wonder Dog!
    Rex The Wonder Dog! 23 May, 2012, 08:40

    This is a page out of the stadium shake down playbook, where one city or state offers huge taxpayer give aways in order to lure a team or a business to their city or state.

    Harms the nation as a whole, and the poor and middle class who end up with minimum wage jobs while the top 1% reaps all the profits out of the taxpayer give aways.

    Reply this comment
  4. Ulysses Uhaul
    Ulysses Uhaul 23 May, 2012, 09:32

    It’s that 1% that rasps and tears away all opportunity, jobs, hope…

    Naked capitalism let’s regulate it!

    JULIA-

    Reply this comment
  5. Beelzebub
    Beelzebub 23 May, 2012, 10:15

    The Hollyweird pigs are some of the richest people in the world.

    IMO they are no less disgusting than the wretched Wall Street pigs who stole trillions from the American taxpayers!!!

    All cut from exactly the same cloth.

    They urinate on the middle class peasants and laugh while they do it!!! 😉

    Reply this comment
  6. JLSeagull
    JLSeagull 23 May, 2012, 13:27

    Danger! Danger! Sactown clowns and Hollywierds are in bed together. They are breeding!
    The hypocracy of Dimowit politicians up and down the state is demonstrated by recent events in San Francisco. SF recently landed two large social media companies and just yesterday the Golden State Warriors by promising them tax breaks from the very taxes they expect every other business to pay while continuing to find other ways to increase taxes and regulations on the business community.
    While the politicos vote tax credits to film in California, they can do nothing to stop local EcoNazi’s from imposing impossible restrictions on the film companies that do so. More incentive to film outside the state.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 23 May, 2012, 13:51

    It’s that 1% that rasps and tears away all opportunity, jobs, hope…

    Naked capitalism let’s regulate it!

    JULIA-

    Reply this comment
  8. PJ
    PJ 26 May, 2012, 11:02

    “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’s the deal. Several films shooting outside of CA are now advertising like crazy for crews and extras b/c they are not available in Utah or Louisiana.

    My guess is, studios go to other states and lobby for tax subsidies, saving them millions, and then give a campaign donation (kickback) to the legislators who sponsor the bill. Then it’s on to the next state…

    Reply this comment
  9. econprof
    econprof 27 May, 2012, 20:49

    The Film Commission’s Executive Director claimed that the $3 billion subsidy is worthwhile because it created some 30,000 jobs. Hmmm. That’s a $100,000 taxpayer subsidy for each job created.
    What if there were no subsidy, and instead taxpayers kept the money. Think they would largely spend it? Think that would create jobs? And probably more jobs, since $100,000 per job is well above average. Most importantly, the jobs would be what consumers chose to spend their money on, not what jobs government decided to subsidize.

    Reply this comment
  10. Adrian
    Adrian 29 May, 2012, 15:55

    Ok, did you actually read this entire report??

    While it’s true incentives are not the lone factor driving location decisions, the report concedes they are the most important factor for the decision makers, i.e. the producers. Over 90% of the producers surveyed said getting the CA incentive was the most important factor in deciding to shoot in California and 81% said not getting the credit was the biggest reason they shot in another state or nation that did offer one.

    Claiming the program is a failure because 36% of the projects that applied and did not get the incentive is VERY misleading, if not outrageous. Of all the projects that got passed over, those 36% that stayed accounted for just 8% of the combined budgets ($242 million) for all passed over projects. Translation, 92% of that $242 million was NOT spent in California. It’s 88% of the production spending that matters, not 88% of the individual projects.

    The UCLA report said the ROI for the state was $1.04 for each $1 invested and, to quote the authors of the UCLA report, “California Film and Television Tax Credit most likely creates an immediate economic
    benefit for the state.”

    The reason California is broke is that we allow the tax base to erode from losing major industries like film & TV. If anything, the tax credit is an example of one of the few things Sacramento has done right in recent years.

    As for the anti-Hollywood bias of the other comment on this thread, I would plead anyone not let political bias and hatred cloud an objective assessment of a major problem (runaway production) and a policy solution (the CA tax credit). Simply lowering taxes will not keep productions in California. Rather, the studios will just owe less and still be free to send their projects to other states who are literally paying cash to cover 25% of the budget. The California tax credit functions as a tax cut that is predicated on them making their films in this state.

    @econprof, the $3 billion was the direct production spending in California, which happened because of $300 million in tax credits. And those tax credits, by the way, function in a way that allows “taxpayers to keep more of their money”. It’s the studio’s (the taxpayer) money and the credit allows them to keep more of it. In return, they employed 30,000 people and spent $3 billion in the CA economy, and that does not even include the indirect multiplier effects. Worst case, the cost-per-job is $10,000, NOT $100k. But, since the program essentially breaks even, the jobs cost basically nothing. With unemployment near 12%, you want to cut this kind of job creating tax break??

    Reply this comment

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