Hollywood Tax Breaks: The Best Incentive to Keep Hollywood at Home?

Governor Arnold Schwarzenegger's recent call to "stop the bleeding" of California's economy includes the aim to keep Hollywood at home by "providing tax incentives to new film and television production located in California and production that has left the state, to return to the state." The last-ditch effort to keep the film industry within state bounds is part of Schwarzenegger's proposal to increase taxes by $4.4 billion. Though it is unlikely that State Legislature will receive the incentives with open arms, they are ultimately necessary in order to keep a huge part of California's economy, film and television production, alive and contributing. Without these proposed incentives, California becomes incredibly less desirable to production companies who are ultimately concerned with the bottom line costs. 

The reality is that the movie industry is finding better opportunities outside of California. Since 1997 there has been a forty percent decline in the number of film production days shot on location in Los Angeles. Unlike 40 other states, California does not offer a tax credit program to lure filmmakers to shoot their movies in the golden state. An industry turning point occurred when the show "Ugly Betty"recently left Los Angeles in favor for New York in order to "take advantage of the Albany-passed package of fat rebates." Jon Favreau, an actor-filmmaker and the director of Iron Man, is lobbying for the tax breaks and incentives to be passed. "When it's cheaper to film in Manhattan than it is here, it's pretty obvious it's reached a point where people who have resisted this should question some of their preconceptions," Favreau said. In an effort to show tangible support for the entertainment industry staying in California, Favreau has also worked to have Marvel Studios agree to buy a studio in the Los Angeles area and to make four films here through 2011 that have combined budgets of $600 million as long as significant tax incentives are put in place in California.

So what does California stand to lose if these incentives are not put in place? Millions of dollars that would greatly benefit everyone in show biz, but also in the state. When shows like "Ugly Betty" leave California they also ditch hundreds of local crew members and California loses major business. As blogger Nikki Finke said on her blog "Deadline Hollywood Daily," "that production,"Ugly Betty," bought lumber, paint wallpaper, cabinets, office products, fabric, film, backdrops, furniture...It used the services of dry cleaners, caterers, restaurants, security ... it paid for permits and use of property, police and fire department personnel, etc." It's not only the big wig moguls that are affected by a show's move; every step in the movie and television production process requires of dozens of people behind the scenes doing things that few people would even think of as relevant to the entertainment industry. To put it in more tangible terms, one figure cited that in three weeks of filming Memoirs of a Geisha, more than $4 million dollars were generated for California's Sacramento and El Dorado counties. These vendors and tradesmen are not in the highest tax bracket looking to hoard some more cash; they are small businesses making a living off of one of California's most historic and fascinating industries. Furthermore, California also stands to loose tradition if the film and television industries fully migrate elsewhere. As a state that is usable because of its huge variety of landscapes within hours of each other, California will always be a great spot for filmmaking... in the golden state, entertainment production is as much about landscape and convenience as it is about tradition and that sparkling California pizzazz.

Though California will always have a Hollywood history that no other state can compete with, history and pizzazz mean little when placed next to millions of dollars. And while other states are continuing to increase incentives California has remained stagnant. New York recently upped their showbiz tax credits on below the line expenses for qualified productions up to 30 percent (from 10 percent). Louisiana is also another state enjoying the millions of extra dollars that are dripping into its economy due to film production. It is obvious that production companies are headed to other states in order to save money and meanwhile the cost of living and pretty much the cost of existing in California continues to rise and rise. Land is more expensive, food is more expensive, services, and real estate all continue to climb. In wake of all these expenses it is obvious that something needs to be done in order to keep production in state. The only thing that truly benefits California more than other states is its convenience aspect. A huge number of producers, directors and actors live in the state and the cost of travel is therefore significantly less within California. This convenience is also an attractive feature to the actors and showbiz people that would rather not relocate for months at a time.

But convenience for movie stars is not enough to keep show biz in Hollywood. Without tax breaks and incentives production will continue to migrate, especially in the face of the rising price of living in California. Schwarzenegger's efforts may have come just a little too late and some accuse the actor-turned-politician of neglecting his own trade. As Finke said, "When he leaves office and if he tries to return to showbiz, he'll be seen as a latter day Nero for fiddling while Hollywood burned." Though Hollywood may not seem like a charity case that needs its costs cut, the entertainment industry's wide scope and importance in California's economy makes the tax breaks a pressing and important issue that needs to be addressed. Here is to hoping that Hollywood stays put at least long enough to see the Governator make another movie.