Fade to red ink: LAO questions tax cuts for films

It’s always been as funny as a Coen Bros. movie that the Hollywood Left Elite, which backs massive tax increases on the rest of us, favors tax cuts for itself. The excuse is that the cuts create valuable movie-industry jobs.

Which is true. But other tax cuts do the same.

The Legislative Analyst’s Office just came out with a study, “Overview of Motion Picture Industry and State Tax Credits.” The background is that the Legislature is considering increasing the tax to $400 million a year from $100 million.

The LAO found that, although hard numbers are difficult to get, the movie industry as a whole seems to have been decreasing in recent years. Problems include not just competition from other states’ subsidies, but digital piracy and competition from new technologies.

I know that I used to see about 30 movies a year in a theater; now that’s down to maybe two. Of course, I’m older, too; movies mainly attract young folks. But unless it’s a major, special-effects blockbuster, it just doesn’t matter to me if I wait to watch it for “free” on cable a year later. It doesn’t help that the country as a whole has been aging.

And let’s face it, the quality of movies is way down. Why waste $12 or more on another dumb sequel, when I can stay home and watch a classic like “Casablanca” again for nothing?

Other tax breaks

The LAO also brings up other tax breaks the movie industry already gets:

“Leases of motion picture films and video tapes for exhibition or broadcast are exempt from the sales tax. In addition, there are several other sales tax exemptions affecting the motion picture industry.

“Personal property, which includes films and videos owned by businesses, is assessed each year at market value, which accounts for depreciation. In California, personal property taxes are levied only on the tangible materials upon which such motion pictures are recorded, and not on the full market value of the film or television program.”

The LAO cautions that increasing movie industry tax breaks would not help as much as advertised; and could cause a “race to the bottom” with other states. Of course, if your a recipient of the tax breaks, that’s a “race to the top.”

On the positive side, the LAO writes:

“The motion picture industry is a key part of the state’s “brand” and identity. For example, the industry is frequently highlighted in state and private–sector marketing strategies for tourism and economic development purposes. Many tourists visit the Los Angeles area either primarily or in part because of attractions related to current or historical film and television production. California’s motion picture industry is not going to disappear overnight because of other jurisdictions’ subsidies, but there may be along–term risk that California could lose a significant share of this flagship industry. It is reasonable for the Legislature to want to take action to prevent this.”

Here’s a better idea: How about cutting taxes for the movie business — but for everybody else as well, such as by instituting a flat income tax of 5 percent?