Hollywood Rallies for Tax Breaks…for Hollywood
March 15, 2014 - 3:35 pm
It appears that some one percenters actually don’t like the idea of raising taxes. This is especially true in the vital and strategically important industry of filmmaking.
Or maybe it isn’t. I mean, it’s not like our national security is at risk if they make a film in Louisiana rather than California, right? Except don’t tell Hollywood movers and shakers that. They are so full of self-importance that they don’t care how hypocritical they look by lobbying the state for tax breaks for their industry while they support tax increases on almost everyone else.
On Saturday, the industry joined with small businesses who thrive off movie and TV shows at a rally to urge state lawmakers to cut them some slack on taxes — for the children, of course.
While many of the once alive and active Hollywood studios have become vacant, film production in states with generous tax credits has been booming.
Louisiana is just one example of this phenomenon. The year before it enacted its tax credit (2002), production spending in Louisiana was only $3.5 million. By 2010, that figure had jumped to $674 million, making for a 19,000-percent increase.
Georgia, Texas, and New York, among others, have also lured film production to their cities by establishing expansive tax credits.
Recognizing the dramatic impact California’s onerous operating costs have had on the industry, parties typically associated with encouraging tax increases are now petitioning for California to demand less of the entertainment sector and become more competitive.
Warner Bros, FilmLA, the city and county of Los Angeles and the national labor union representing working actors are just a few of the traditionally left-wing entities that have formally voiced their support of lowering taxes on film makers.
Many businesses and organizations that are not even directly involved with production have been touched by the decline in the industry.
Ray Bidenost, principal of Chef Robért Catering, also has serious concerns about the outflow of capital and jobs.
“In this slow-growth economy, the state of California cannot afford to stand by while literally billions of dollars flow to other regions of the country, or overseas,” he said in a statement.
Bidenost added that lawmakers needed to make California more competitive to ensure that “the movie and TV industry, which is an integral part of the California economy, returns and flourishes here — so that we can continue to provide good-paying jobs for thousands of Californians and their families.”
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.