MOVIE CREDITS CONTINUE; THIS TAX BREAK REALLY WORKS

 

CALIFORNIA FOCUS
FOR RELEASE: TUESDAY, AUGUST 15, 2023 OR THEREAFTER

BY THOMAS D. ELIAS

      “MOVIE CREDITS CONTINUE; THIS TAX BREAK REALLY WORKS”

 

        If there’s one tax break California lawmakers have granted that really works, it’s probably the film tax credit that was extended another five years the other day with a signature from Gov. Gavin Newsom.

 

        While a lot of the talk about a massive population exodus from this state is exaggerated hyperbole (California having lost less than 2 percent of its populace to out-migration over the last decade), there was nothing fictional about what happened in entertainment, the state’s third largest industry – even before today’s work stoppage.

 

        Television production was migrating en masse to newly built studios in Canadian cities like Vancouver and Toronto. Movies were increasingly filmed in Georgia, Louisiana, New Jersey, North Carolina and New York. This happened not because of greater resources, but because of tax subsidies granted by those states and some Canadian provinces.

 

 

        Local governments went so far as to foot the bill for construction of studios, outfitting trailers as dressing rooms and even covering hotel bills.

 

        Early in the last decade, California realized it could no longer take for granted its status as the entertainment capital of the world. If the Golden State weren’t careful, Los Angeles might have become little more than a home to studio executives, post-production houses and editing rooms. It could have been sayonara Hollywood, except for a whitewashed sign in the hills visible from the Santa Monica Freeway, a wax museum and some memorabilia shops along a few faded boulevards.

 

        Some other industry easily could have displaced entertainment as the third biggest in this state, behind only high technology and agriculture.

 

        But that didn’t occur; entertainment survives as big business here largely because of tax credits granted to the industry in return for keeping production home.

 

        “You follow the money,” actor-director Ben Affleck told one reporter after the tax credit funds began flowing. He noted that tax credits and incentives sometimes cover as much as one-third of production costs in a business where profit margins can be thin. States go after California’s production schedules because they can lead to new jobs (mostly temporary ones) and more government revenue without the kind of environmental problems brought by new factories and warehouses.

 

        Movie makers almost always guarantee host states they will leave conditions exactly as they were before, or better. Many a home in Southern California, similarly, has gotten a facelift after being used as a movie location.

 

        One study showed that over the last decade, California’s tax credits produced at least $1.11 in state and local tax revenues for every dollar of tax benefits deployed.

 

        Relatively small as California film location credits still are (less than one-fifteenth of national credits from a state with about one-ninth of the national population), the tax break led to more than $10 billion in movie spending in California over the last decade.

 

        Plus, it helps keep the high-paid, highly-taxed film industry executives and stars and their resources at home.

 

        So it was only sensible for the Legislature and Newsom to renew those benefits this summer, along with a couple of new benefits to the industry. One fresh bone tossed to the studios: When their tax credits are larger than their tax bills, they will now get cash payments, rather than just carrying the benefit over to future years of tax returns.

 

        The new rules also include safety factors inspired in part by the “Rust” debacle, where actor Alec Baldwin accidentally killed a cinematographer on a movie set in New Mexico because he believed a prop gun wasn’t loaded -- and it was.

 

        Movies involving firearms will now need to have a safety advisor on set during filming. Armorers and prop masters will also get new training and for the first time must be licensed.

 

        Plus, a small part of tax credits will depend on meeting new diversity targets, with a subsidy for training film workers going to community colleges that serve mostly students of color.

 

        It’s a deal that promises to maintain entertainment as big business in California by continuing a tax break whose benefits to the state have long been proven.

       

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    Email Thomas Elias at tdelias@aol.com. His book, "The Burzynski Breakthrough: The Most Promising Cancer Treatment and the Government’s Campaign to Squelch It," is now available in a soft cover fourth edition. For more Elias columns, visit www.californiafocus.net