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California Report Confirms That Tax Giveaways to Hollywood Are a Waste

California Report Confirms That Tax Giveaways to Hollywood Are a Waste
Chris Goldberg/LA Weekly Flickr pool

Politicians, including state Assemblyman Mike Gatto and L.A. Mayor Eric Garcetti, have been falling over themselves to give your hard-earned tax dollars to the billionaire-controlled mega-media industry we call Hollywood.

See also: Should White Film Industry Titans Get a Tax Break as They Fail at Diversity?

Their argument is that tax breaks keep production in California, lead to jobs, and ultimately pay themselves off with revenue generated by all this business activity. A new report from the state Legislative Analyst's Office concludes that the industry doesn't really return the favor when we give it our money, though.

According to a summary, ...

" ... The film tax credit does not 'pay for itself.' 

Regarding the always dubious analysis of the L.A. Economic Development Corporation, which claimed that every $1 in California film tax credits returned as much as $1.11 in state and local revenue, the Legislative Analyst calls b.s.

"The analyses used to support the film tax credit vastly overstate their findings," the report, released last week, says. The office estimated that revenues returned were more like .65 cents on the dollar.

"It is incomplete - and, arguably, not accurate - to claim that the tax credit program pays for itself based on the LAEDC data," the report sings. "The state government receives far less revenue back than it spends on the tax credit ... "

Ouch.

A proposal by state assemblyman Mike Gatto and Raul Bocanegra would expand the state's film tax credit so that California can compete with the likes of New York, which the two say has been stealing productions away from L.A. 

New York offers up to $420 million a year in tax subsidies, while California gives away $100 million, mostly to indie, smaller budget films with budgets of $1 million to $75 million.

The bill seeks to expand the amount of cash we give away to media moguls so we can attempt to match New York's lure.

Critics have argued that these taxpayer giveaways don't work however, and some have questioned why we would give money to an industry that has failed year after year to diversify its workforce, especially in a city that's half female and so-called majority minority.

Those good jobs Hollywood generates always seem to go to Anglo men. Some key facets of Hollywood, including directing, writing and major agency work, are about 90 percent or more white-male.

And we've noted that, while film and TV pay excellent wages, the rest of us chip in for the high cost of living in Los Angeles. Rent and real estate is simply out of control, partly because Hollywood incomes sustain them. But we don't all have Hollywood incomes.

Why would we want to give more of our money to these people?

See also: Local Film Industry Is Healthy as Hollywood Begs for Taxpayer Cash

The Legislative Analysts Office is asking some of the very same questions. It says that continually offering tax breaks constitutes a race to the bottom: As other states increase their concessions the result is that we spend more of our cash but end up with the same result:
 

California Report Confirms That Tax Giveaways to Hollywood Are a Waste
Sterling David Photo/LA Weekly Flickr pool
When government does not offer industry subsidies, businesses in those industries generally locate their economic activities based on where they would be best suited.

... California's motion picture industry is not going to disappear overnight because of other jurisdictions' subsidies ...

... In responding to other states increased subsidy rates, California may only stoke this race to the bottom without making any real headway in terms of increasing its share of film and television productions. Meanwhile, the expense of the film tax credit program would increase.

Increasing California's subsidies could cost taxpayers billions, the LAO says.

Assemblyman Gatto and Bocanegra read the report differently, however, seeing only reminders that giving tax dollars to the ultra-rich is good for all of us. These Democrats obviously believe in the Republican concept of trickle-down economics, whereby giving to the wealthy ultimately benefits all of society through job creation.

In a bizarre quote that flies in the face of the LAO's backhand to the LAEDC's usual spreadsheet alchemy, the pair says:

The California Legislative Analyst's Office (LAO) issued a report that confirmed what independent economic analyses of California's Film Tax program have found: that the program has merit.

Um. Sure.

At least Yusef Robb, spokesman for Hollywood cheerleader Garcetti, avoided the pitfalls of spinning the LAO's work beyond the realm of truth, as the politicians above did. "We are currently reviewing the report," he told us.

The LAO's report notes that California had 65 percent of America's film and TV jobs in 2004 and about 52 percent of them today. "Overall permitted production days have increased by about 90 percent since 1993, but total permitted production days in 2013 remain somewhat below 2005-2007 levels," the report says.

Still, the Legislative Analyst gave five reasons why it's probably unwise to give our money to this industry:

* Film and television production in California could decline anyway.
* Responding to other jurisdictions' subsidies could be very expensive.
* Interstate and international competition could stoke a "race to the bottom."
* For state government, the film tax credit does not "pay for itself."
* Subsidizing one industry sets an awkward precedent.
* It will be difficult to evaluate the effectiveness of the film tax credit.

The report concludes:


Continuing or expanding the tax credit program would reduce state tax revenues - affecting all residents of the state - while largely benefiting a single region of the state.

To that we would suggest that such tax giveaways also largely benefit a single class in the state - the Hollywood elite.

Send feedback and tips to the author. Follow Dennis Romero on Twitter at @dennisjromero. Follow LA Weekly News on Twitter at @laweeklynews.


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