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Hollywood tax credits should be blacklisted

Hollywood tax credits should be blacklisted

California’s Democratic lawmakers often complain about the tax privileges that billionaire business owners receive, while GOP legislators like to criticize the liberal politics that emanate from Hollywood. Yet both groups have been supportive of tax breaks for Hollywood’s movie moguls in an effort to keep TV and movie production in California.

It’s not just hypocritical, but a waste of taxpayer dollars. California’s Film and Television Tax Credit has grown to $ 330 million since its inception in 2009. It’s not a lot of money in terms of California state spending, but the credit sends the wrong signal: that those businesses with the political clout receive special deals, while others struggle with a high tax burden.

The California Film Commission recently claimed $ 8.4 billion in economic and employment benefits from the credits. It points to “27 new television series, 18 pilots, one mini-series, two movies of the week, 58 recurring TV series, 16 relocating television series, 37 non-independent feature films, and 30 independent features films” since Jerry Brown approved the second phase of the credits four years ago.

That sounds like a good bang for the buck. But, as CalMatters explained last week, the commission’s data is “simply a tally of the spending tied to every production that got some credit.” Sure, most movie companies will gladly accept a tax break, but that doesn’t mean they wouldn’t produce the movies in California anyway. Plus, most movie studios are located in Southern California, and it’s typically cost-effective to film nearby.

The commission, the news report added, also looked at productions that failed to receive tax breaks and found that most productions ultimately were made in other states. However, there’s no way to track if the lack of a tax credit was the real reason companies filmed elsewhere — and the commission has a vested interest in the success of the program.

By contrast, CalMatters pointed to an academic analysis of the costs and benefits of the credit by University of Southern California professor Michael Thom. “Results show the tax credit had no significant effect on changes in three occupational categories associated with the motion picture industry,” he noted. “Employment was similarly unaffected by competing incentives.”

His conclusion echoes our view — that California lawmakers should quickly get rid of the state film tax credit. Whether or not the tax breaks lead to more California-based film production isn’t our main concern. The real issue is whether government should provide special, targeted benefits to hand-selected groups, whether they are in show biz or the manufacturing business.

California should definitely reduce its overall tax burdens on businesses, but such breaks should be given across the board and not on an ad hoc basis. Furthermore, as Thom added, “motion pictures may be described as California’s flagship industry, but … the state also has flagship problems.” In other words, tax dollars are best used to address the state’s voluminous public-policy problems.

Supporters argue that other states are luring California’s movie production elsewhere, which is sometimes true. But the best way to combat bad policies is with good ones, not by outdoing what other states are offering. California needs to provide a better business climate for everyone if it wants to keep movie production — and all sorts of other businesses — from fleeing to other states.


Press Enterprise