Jerry Brown, California's skin-flint governor, acceded Wednesday to an increase in the film tax credit to $330 million. Brown is a well-known skeptic of Hollywood subsidies, but the combined forces of organized labor, multinational entertainment conglomerates, and B-list celebrities proved too powerful to resist.
The industry didn't get the $400 million it wanted, but the final figure is closer to that number than to Brown's offer of $200 million. It's also more than triple the current $100 million tax incentive.
So who are the big winners and losers from this deal? A rundown:
The Motion Picture Association of America
The industry trade group quarterbacked the campaign to stop “runaway production.” The MPAA rounded up a broad coalition, including chambers of commerce, labor groups, and cities up and down the state. Offering a bonus for productions outside Los Angeles helped win over Northern California lawmakers, who have traditionally opposed tax giveaways to a Southern California industry.
The International Alliance of Theatrical Stage Employees rallied the labor movement to support the bill. Among the supporters were the California Federation of Teachers, United Teachers Los Angeles, and unions representing firefighters and construction workers. By broadening support to labor groups not affiliated with the film industry, IATSE was able to put more pressure on labor-friendly Democrats. IATSE also held rallies and organized a letter-writing drive.
Producers of TV shows and blockbusters
TV shows and big-budget movies are largely excluded from the current incentive program. That will change dramatically under the new system. About 60 percent of the $330 million pot will go to TV shows, with another 35 percent going to big-budget films. Only about 5 percent will be reserved for independent films. The reason? TV shows and big-budget movies are bigger job generators than independent movies, and job creation is the raison d'être of the new law.
Mike Gatto, Raul Bocanegra, Kevin De Leon, Eric Garcetti
Gatto and Bocanegra co-authored the bill and shepherded it through the Legislature. Both L.A. Democrats, they can honestly tell their constituents that they brought home the bacon for the hometown industry. De Leon, another L.A. Democrat, showed his clout by single-handedly eliminating the old lottery system and replacing it with a jobs-based selection process. And L.A. Mayor Eric Garcetti — while he was not in the room when the final deal was made — did rally support for the expansion and put a full-time “film czar” on the issue last year.
Lobbyists, consultants, and California film commissioners
The tax credit expansion is a big win for the industry lobbyists who helped make it happen. It's not every day that the cash-strapped state of California hands out $330 million to profit-making enterprises. Beyond that, however, the legislation will replace the subsidy lottery with a process under which film productions must compete for state tax incentives based on their ability to create jobs. This will be good for the lobbyists and consultants who know how to win those sorts of competitions, and can market their services to film producers. The California Film Commission will have a lot of clout in setting up the system.
California Teachers Association
The CTA, which on some days is the most powerful special interest in Sacramento, was the most prominent opponent of the bill. In the eyes of the teachers' union, a dollar spent on Hollywood is a dollar not spent on teachers. But with IATSE rallying the rest of labor — including UTLA and the CFT — the CTA was left isolated and without allies.
Back in April, the state Legislative Analyst's Office issued a report that, in a typically restrained and wonkish way, cast doubt on the wisdom of film tax incentives. Among other points, the LAO noted that California is competing in a “race to the bottom” with other states and other countries. (The MPAA happens to be exacerbating runaway production by lobbying for tax incentives in other states.) The LAO also noted that public funds generally ought to go to things that serve a social good, like medical research. But lawmakers were unmoved by this humble dissent, especially once Hellboy started working the Capitol corridors.
Christopher Thornberg, the founder of Beacon Economics and an adviser to local lawmakers, laid out the case against film tax incentives in a post on his website. According to his analysis, runaway production is an industry-generated myth. He also argues that most of the industry-funded studies that support tax incentives are “preposterous.” “Their arguments are delivered slick, they're delivered clean. And they're complete nonsense,” Thornberg told the Weekly. “But we're gonna do it anyway.”