THE RATIONALE FOR NEWSOM’S PLAN TO HIKE FILM TAX CREDITS

 

CALIFORNIA FOCUS
FOR RELEASE: FRIDAY, DECEMBER 6, 2024 OR THEREAFTER

 

BY THOMAS D. ELIAS
 “THE RATIONALE FOR NEWSOM’S PLAN TO HIKE FILM TAX CREDITS”

 

Businesses are moving out of California – or at least building new plants in other states – partly because this is such a high-tax state. That’s the frequent claim of Republican politicians who have tried for many years to bludgeon Democrats with this issue.

 

Among the biggest draws for businesses moving to other states are the property tax exemptions they often get – no levy for the first 10 years or so in Texas, for just one example.

 

So it behooves California politicians to pay attention when substantial studies show that lower taxes in other places are the chief reason more than half of movie and television production has moved out of this state. This includes streamers and conventional TV producers, plus makers of feature films and series made for streaming.

 

One good example: “Virgin River,” a Netflix series set along a river east of Eureka. Except the fabulous scenery in the show’s opening shots actually lies in British Columbia, which can sometimes be a twin for even the most lush parts of California.

 

Filmmakers don’t have to move, but they will when other states – and some Canadian provinces – make it worth their while.  Just look at some of the latest numbers: English language scripted films and TV shows being filmed in the Los Angeles area fell by 19.7 percent in 2023 compared with the previous year, reports Film LA, which tracks regional production. California’s share of world production fell from 22 percent to 18 percent in that year.

 

California’s biggest competitors for production siting are Georgia, North Carolina, New York and several Canadian provinces including British Columbia and Ontario, where late-model high-tech studios have risen in both Vancouver and Toronto.

 

Now comes Gov. Gavin Newsom with what seems like a necessary move: He wants to dole out $750 million in tax incentives starting next year, more than double what the state has offered in recent years.

 

This is a tax credit that works. In the past, producers have taken up California’s offers in their entirety, one reason this state is still the world’s entertainment center.

 

“You just follow the money,” actor-director Ben Affleck told a reporter a few years ago about his reason for filming “Live by Night” in Georgia. Tax credits and incentives sometimes cover as much as one-third of production costs in an industry where profit margins can be thin. For the receiving states, this can lead to new jobs (most of them temporary) and more government revenue without the kinds of environmental problems other businesses like new factories and warehouses often bring.

 

The money involved dwarfs even Newsom’s proposal. Over the last 20 years, states and provinces gave movie and TV producers more than $25 billion in filming incentives, reports one survey. Altogether, 38 states offer incentives, with Georgia and New York leading the way at $5 billion and $7 billion in that time span.

 

Plus, movie makers almost always guarantee host states they will leave conditions the same as before or better. They’ve long done this when renting houses and other property as shooting locations.

 

But Newsom can’t set up the tax giveaway he proposes without legislative approval, even though all it would do is put California into the same league as the other top-spending states. But lawmakers probably won’t be hard to convince. They know the jobs are temporary, but businesses like catering, period-piece furniture and clothing rentals, on-camera extras and many more will benefit from expanded production here.

 

Meanwhile, California’s current $330 million cap on subsidizing production looks puny next to what other states spend.

 

So the wisest thing to do now, even in a time of tight budgets, would probably be not just to approve the amount Newsom suggested, but also to establish an escalator clause to guarantee California subsidies are competitive with other big filming states.

 

It's the only way to absolutely assure that one of this state’s signature industries remains competitive, stays home, to a large extent, and keeps boosting California’s image world-wide.

 

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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