Subsidizing Success

The U.S.'s flashiest industry longs for the dole


Hollywood wants the United States to become more like Canada. It's not our neighbor to the north's single-payer health care system they want to copy this time. Nor is it that country's strict gun control laws. Incredibly, entertainers have their eyes cast on the Canada's industrial policy.

"Canada's come up with a really great business plan," Joe Pantoliano, who plays Ralphie on HBO's "The Sopranos," explained last week to Hardball host Chris Matthews. "They're giving us like up to 25 percent tax credit against every dollar that we spend there."

Canada has long been troubled by the U.S. dominance of cultural, entertainment, and information industries. Canadian officials are vigilant about ensuring that its citizens don't use U.S.-purchased direct broadcast satellites to poach U.S. television shows. It wouldn't be right for them to miss those Canadian advertisements. The country even forces U.S. magazine publishers to produce Canadian editions.

Yet for all its angst about Canadian identity drowning in a sea of Yankee swill, it not only welcomes but taxes its citizens to subsidize one aspect of the U.S. entertainment industry: film and television production. Canadian governments, both national and provincial, roll out a red carpet of tax subsidies for the U.S. film and television industries. If you subsidize it, it will come. (A weak Canadian dollar hasn't hurt, either.) According to one report, the share of U.S.-developed film and television productions shot in Canada nearly doubled from 14 percent to 27 percent from 1990 to 1998.

At first, the subsidy laws included cultural content restrictions: In order to qualify for the subsidies, the projects had to in someway be about Canada, or at least clearly be set in the Great White North. After Bob and Doug McKenzie did the country proud in Strange Brew, officials were satisfied with only a Molson product placement in any random bar scene. They liked the idea of having entertainment types around and softened. Now, scenes can be supposedly set in the U.S. and the stars can all be U.S. citizens. As long as the film is shot in Canada, it's OK. If Bob and Doug can't be in front of the cameras, they can certainly be working behind them. And that's worth a government subsidy, no?

Pantoliano and others in the U.S. entertainment business think so. "The United States government has to create the same incentives in order to keep work here," said Pantoliano. The Creative Coalition, the Hollywood arm of the Democratic party run by one of the Baldwin brothers, is hosting a series on panels titled, "Chasing the Runaways: The Flight of U.S. Film and Television Production." Sen. Blanche Lincoln (D-Ark.) introduced a bill at the end of last month to provide independent film and television companies with a 25 percent tax credit for wages paid up to $25,000 per year.

In other words, it's time to put one of the U.S.'s most dynamic, successful, and profitable industries on the government take. It's worked so well for the U.S. steel industry, why not for Hollywood's supporting staff. U.S. farmers get billions in emergency profit support each year, why not do the same for those who toil in tinsel town?

The practical effect would be to have workers in other industries, many of whom have adjusted to tough international competition in their own field, subsidize the entertainment industry. In effect, Canadian taxpayers are subsidizing U.S. consumers by graciously providing us with less-expensive entertainment. Canadians seem more willing than those of us who live to the south to let government arrange our affairs with cross-subsidies, although we're not that far behind. Still, one wonders how the big money actors and other high earners in the entertainment industry would feel about adopting another aspect of Canada's excellent industrial policy: A tax hit that reaches 60 percent on top earners.