New Study Proves it! Hollywood Requires Tax Breaks!

Matt Welch | August 22, 2005

That may as well have been the headline on this deeply incurious L.A. Times article regurgitating as fact data from a new Runaway Production study by the industrial-policy boosters at the L.A. County Economic Development Corporation, who are trying to coax regional tax favoritism from Sacramento with talk like "California loses more than $10 million in tax revenue when a larger-budget movie costing about $70 million is made elsewhere." California's actor-governor, a professed fan of Milton Friedman, is enthusiastically backing a new bill that would

provide a 12% tax credit on a feature film project's spending in California, with a cap of $3 million per production. Television movies, which have thinner profit margins, could get an additional 3% credit.

Best quote, in an article full of unconvincing paeans to Hollywood's humble worker bees:

Director Taylor Hackford said he shot the Oscar-nominated film "Ray" in Louisiana because of a $3.7-million tax credit.

"I wouldn't have been able to make that film without that kind of help," Hackford said. "I want California to wake up."

My argument here for letting Hackford's audience continue to sleep.

Comments

|8.22.05 @ 1:52PM|#

Dumb, dumb, dumb. Massachusetts tried to stop heavy industry from going to cheaper places with tax breaks, and it failed miserably. The companies took the tax breaks, stayed for an extra two years, then left anyway.

When you're the top shelf location for a certain type of industry, and the second and third tier locations gain a little ground by attracting the trailing edge firms, you don't try to compete on price, because you'll never win. Any military man can tell you, you succeed by reinforcing locations where you're winning, not by throwing your reserves where your enemy is holding firm. That just eats up your resources, and you miss the opportunity for the big breakthrough.

Timothy|8.22.05 @ 1:59PM|#

I'm sure that Ray Charles being from Louisiana had nothing to do with Hackford's decision.

Timothy|8.22.05 @ 2:01PM|#

I'm sure that Ray Charles being from Georgia had nothing to do with Hackford's decision.

Timothy|8.22.05 @ 2:02PM|#

Apparently I hit post rather than preview the first time, I apologize for being technically incompetent.

The Wine Commonsewer|8.22.05 @ 2:10PM|#

I'm doing my own taxes right now (double extension), which makes me a little bit grumpy to read about Hollywierd trying to reach into my pocket for even more cash.

Maybe that fat-ass Meathead can loan them some of the tobacco money that he's using to launch his run for the governor's seat. Yeah, that's the ticket, let Meathead fund his own kind and leave the rest of us alone.

ed|8.22.05 @ 2:11PM|#

Last chance to claim he's from Maine, Timothy...

David Rollins|8.22.05 @ 2:34PM|#

I would be a happier person today if "Ray" hadn't been made. Wasn't it better to know implicitly that he was an old school bluesman drug addict, without having that sycophantic blatant oscar-craving performance by the guy from "Booty Call"? And was I the only person creeped out by how quickly "Ray" appeared in theaters after the man's death?

|8.22.05 @ 2:35PM|#

It took a little digging, but I found that the estimated budget for Ray was 40 million (though another google hit said 30 mil), and as of last March it had grossed 75 million. I know gross isn't profit, but still those kinds of big bucks makes his claim that his film needed a subsidy a little bit less credible.

Timothy|8.22.05 @ 2:57PM|#

I hereby claim Ray Charles was from Maine, because ed compelled me to do so.

Although, I'm pretty sure about Georgia.

|8.22.05 @ 3:07PM|#

Ray Charles went back and had his publicist rewrite his bio (again!) to make him a native of Georgia after a string of his early songs -- "Maine on My Mind," "Iowa on My Mind," "Nebraska on My Mind," Jersey on My Mind," and "Utah on My Mind" -- all failed to become hits. With Georgia, he finally hit paydirt.

|8.22.05 @ 3:14PM|#

From WaPo:

To head off so-called runaway productions, more than a dozen states began offering their own incentives within the past two years, and they're now locked in battle trying to one-up each other.

Maryland joined their ranks after the "Annapolis" debacle. This year, the state legislature approved $4 million in wage rebates for movies, television shows and commercials filmed in the state. Virginia, which lost $750 million worth of film work in the past four years, plans to propose its own perks when the General Assembly reconvenes in January. And the District is watching its neighbors and weighing its options as Maryland steals its scenes, with movies casting Baltimore in the role of the capital.

|8.22.05 @ 3:53PM|#

this is exactly why i work in distribution - my job is safe no matter where the movie gets made. (and since i work in cable distribution, we're virtually box-office proof too...)

|8.22.05 @ 4:15PM|#

Wait a minute, Matt. You are arguing against a tax cut for what reason, exactly? Couldn't, and shouldn't, L.A. County or the city or whomever this is just cut back spending to make up the revenue lost here? Would you support it if it were an across the board tax cut, not targeted to a specific industry?

Mike|8.22.05 @ 4:21PM|#

Don,

I was wondering how long the anti-Hollywood sentiment here would blind to that obvious question.

Jadagul|8.22.05 @ 4:36PM|#

As someone whose father makes a living exploiting similar tax credits offered by Hawaii and Louisiana, I strongly oppose their introduction in California. We don't need the competition.

Timothy|8.22.05 @ 4:39PM|#

Stevo: Classic!

Matt Welch|8.22.05 @ 5:09PM|#

Don -- I don't approve of targeted tax cuts for individual, politically powerful industries, no. Why is Hollywood any more deserving than the toy factories downtown? Eliminate industrial favoritism in the tax code as much as possible, slash the ridiculous (and ridiculously unproductive) state bureaucracy, then lower taxes across the board.

|8.22.05 @ 5:41PM|#

Is Schwarzenegger:

a) totally clueless about economics despite issuing sound-bites about Milton Friedman,
b) cynically playing to what he thinks is his base (and, heck, he oughta know),
c) actually right that this will help California by keeping production in-state and netting more money than it loses, or
d) simply playing favorites for his buds in Tinseltown?

I'm skeptical about (c) but honestly I can think of decent arguments for any of these.

Matt Welch|8.22.05 @ 6:19PM|#

Shelby -- My sense/guess is that Arnold's a pretty typical country-club Republican libertarian. Slashing red tape is just one of many ways of helping the Chamber of Commerce. He has gone to individual companies ready to leave the state and asked "what can I do to make you stay?" And needless to say, he has made a bunch of films in Mexico.

|8.22.05 @ 7:43PM|#

How about a tax incentive for good movies only. If a movie sucks the tax is doubled to ensure good movies can get the break. Sucks will be defined as any movie that doesn't bring in the falafel.

|8.22.05 @ 9:44PM|#

This is a variation on Stadium Welfare. Louisiana is getting more out of the productions than was spent on the subsidies, but the bulk of the benefit is going to limited segments of the population.

If LA (Hollywood) wants to fight back on the cheap, offer a sweetheart deal to get the Saints into the Coliseum.

|8.22.05 @ 11:12PM|#

Dynamist,

I think you've made a great suggestion. The Saints will never win in New Orleans. But I think you should change their name to the "Devils" if you're moving them to LA, =D

|8.23.05 @ 2:28PM|#

I thought Ray Charles was from Florida.

Anyone know if this could be a WTO issue?

|8.23.05 @ 3:15PM|#

I thought Ray Charles was from Florida.

He was born in GA but was taken to FL when he was young.

"September 23, 1930 - Born Ray Charles Robinson in Albany, GA.

1937 - Living in Greenville, FL, is stricken with glaucoma, which results in blindness.

October, 1937 - Enrolls in Florida's State School for Deaf where he studies composition, classical piano, organ, trumpet, alto sax and clarinet."