by Jon Sanders
Director of the Center for Food, Power, and Life, Research Editor, John Locke Foundation
The Legislative Analyst’s Office of California published a study on April 30, 2014, that found California’s production tax credit returned to the state 65 cents per dollar expended. Which would put California right in line with all the other states returning pennies on the dollar on film tax incentives. North Carolina’s program returns about 19 cents per dollar of revenue spent, per Fiscal Research.
Wait wait wait — why on earth does the home state of Hollywood need film incentives?
A very good question, and it shows just how far this race to the bottom has gone. So many states got into giveaways to film production companies that it perverted the business model. Now part of business decisions involves finding out which state’s political leaders offer the most cash, since aside from a few establishment shots and specific locales, stories can be filmed anywhere. So the natural home for the industry and all its infrastructure is being abandoned in favor of the big (public) spenders at the moment.
Also, California’s tax structure is punitive, so the lure of tax incentives elsewhere (where taxes are already lower) is likely even more appealing. California’s leaders could see fleeing film productions in the context of its ongoing capital flight, and therefore choose to fix the root problem rather than address a sensational symptom.
But that’s the thing with targeted tax incentives: they’re about government picking specifically favored winners, not about government clearing out of the way with an all-comers tax incentive (i.e., lower taxes for everyone) to allow more and many different kinds of winners.