Hollywood Rallies for Tax Breaks…for Hollywood
March 15, 2014 - 3:35 pm
There is a lot of filmmaking in Canada, due to relaxed work rules for unionized craft workers and the cheaper Canadian dollar. More than 1500 movies and TV shows have gone north in the last decade to take advantage of a the Canadian government’s open-arms policy towards the entertainment industry.
Even though Canada has spectacular settings, it’s not the production values that film producers go there to find. The lure is, in a single word, money. In Southern California, the studios have highly efficient soundstages and an abundance of skilled technicians, but the unions’ work rules make it extremely expensive to shoot exteriors. For example, a production can shoot for only 14 hours a day with normal overtime and then must pay double time. It also must employ redundant Teamster drivers to chauffeur actors to and from locations (even if they have their own drivers). These costs run even higher for independent producers—about 9 percent on average—who are not part of the National Term Agreement that the studios have with the unions. As a result, the indies need Canada—or another deeply discounted country.
In Canada, producers still have unionized labor to contend with, but they get a huge discount—in the late 1990s, it was as high as 35 percent—by paying labor in Canadian dollars. On top of that, the Canadian Federal Government provides foreign producers with a subsidy called the Film Production Services Tax Credit, which now equals 16 percent of the Canadian labor costs. (It was recently raised from 11 percent to offset a rise in the Canadian loonie against the American greenback.) Also, British Columbia offers an additional 18 percent rebate on labor from that province. Finally, there is a 20 percent break on digital effects, if they are done in Canada. In order to qualify for this tax credit, either the director or the screenwriter and one of the two highest paid actors must be Canadian, which might partly explain the demand for Canadian actresses such as Rachel McAdams and Alexz Johnson, the star of Final Destination 3. *
It is likely that even with tax breaks, the industry’s union woes won’t be solved, nor will ancillary costs like catering and outside craft work come down. Living and working in California have become prohibitively expensive and high taxes are only part of the problem. What ails California is gargantuan government. The number of state workers in California grew by nearly 10% in the decade of 2002-12. Wages increased by 42.4% This, at a time of plunging revenues and recession. Someone somewhere had to pay those public employees, and Hollywood productions looked like a ripe target.
Now they’re paying for their shortsightedness. And as much as state government loves the film industry, they may not be able to grant Hollywood’s wish for tax breaks simply because they can’t get the money anywhere else.