Editorial: To not nix pix, California must use tax trix
Eight of the nine nominees for this year’s best picture Oscar were filmed outside California. Nearly all of the live-action movies nominated in other Academy Awards categories were filmed in other states or countries as well. In the last two years, California — host of the Oscars, headquarters of the major studios and home of Hollywood itself — has barely appeared in a big-screen blockbuster.
This exodus of major film production is more than a blow to the state’s ego; it’s a big hit to its economy. As more states and foreign countries offer tax breaks and other financial incentives to lure films and television programs, California — and particularly Los Angeles — has hosted fewer of the high-value productions that provide local revenue and middle-class employment.
Last year in L.A. County, on-location feature film shooting days totaled roughly 7,000, or about half the number at the county’s 1996 peak; TV drama shooting days are down 39% from their 2008 peak. Over the last decade, California lost 16,000 entertainment jobs — jobs that pay, on average, $98,000 a year. Their loss has a ripple effect, reducing business for caterers, security companies, restaurants, dog walkers and all the other people who earn a living on entertainment industry spending.
To help fight runaway production, California lawmakers in 2009 enacted a $100-million-a-year tax credit program. The credits, awarded through a lottery, allow production companies to cut their state tax bills by 20% to 25% of their crew and locations costs. Now, as that program is set to run out of money, L.A. Assemblymen Raul Bocanegra and Mike Gatto have drafted legislation to increase the funds available for tax credits, perhaps to as much as $2 billion over five years, and to expand the program to include big-budget movies and certain TV programs that were previously excluded.
While Assembly Bill 1839 is still a work in progress, it is a necessary step to protect the middle-class jobs and revenue created by one of the state’s signature industries.
There’s an understandable pushback from people who don’t want to cut Hollywood a tax break at the expense of social services, education and other state programs. The entertainment industry doesn’t save lives or foster innovation that transforms society (unless you consider watching “House of Cards” on demand a life-changing experience). Others argue that it’s unfair to single out one industry for incentives, and that this will make it harder to say no when technology companies, financial firms and other businesses come begging for their own tax breaks. Still others note that California is slipping into an unwinnable race to the bottom, as states seek to steal film and TV production from one another — at an ever greater cost to state and municipal budgets.
But the fact is, there is a race underway, and for now, California is losing it. This is true even though California still has a competitive advantage over other states, with a climate that allows year-round shooting, proximity to the major studies and a local pool of makeup artists, camera assistants, carpenters and other below-the-line professionals. But that advantage is shrinking as productions film more regularly in states with generous tax credits such as New York, Louisiana and Georgia, which are developing their own infrastructure, including sound stages, prop houses and a skilled workforce.
The challenge for lawmakers is to craft a smart program that is narrowly targeted at those productions truly at risk of leaving and those that won’t come here without an incentive, as well as those that create the most jobs. The existing program excludes films with budgets over $75 million and network TV dramas; as a result, those high-value productions are rarely made in California anymore. AB 1839 would expand the program to include them. It’s important to avoid the mistake of New York Gov. Andrew Cuomo, who allowed a generous tax break for “The Tonight Show’s” relocation from Burbank only to learn that its producers had never intended to stay on the West Coast. California should not be cutting deals with individual shows but rather creating a system that delivers maximum value for taxpayers. So far, AB 1839 appears to do that.
California risks losing the economic benefits of being the center of the entertainment industry, and that’s a chance the state — and Los Angeles — can’t afford to take.
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