In 2014, Gov. Jerry Brown signed a bill that would give Hollywood $1.6 billion in tax breaks over a five-year span. This in a relatively rich state that has some of the nation's worst roads, struggling public schools and an embarrassing poverty rate.
Backers of the tax break said it's necessary to keep the film and television industry anchored in the Golden State and, more specifically, in its hometown of Los Angeles. Yet earlier this month, FilmLA, the nonprofit tasked with issuing area film permits, reported a 13 percent drop in TV pilots filmed in the L.A. region — despite the friendly tax deal.
L.A. Mayor Eric Garcetti used the group's findings as an excuse to continue to lobby for additional tax cuts in a strange endorsement of trickle-down economics: “L.A. is still losing too many good jobs, and too much revenue, to other states,” he said. “We must continue investing in the future middle class of this city.”
But two reports published recently by researchers from the USC argue that the economic benefits for U.S. states that have offered tax incentives for television and film production were “nil or nearly nil.” So much for that.
“The incentives are a bad investment,” said the studies' lead author, Michael Thom, an assistant professor at the USC Price School of Public Policy. “States pour millions of tax dollars into a program that offers little return.”
The studies include “Lights, Camera, but No Action?” published in the journal American Review of Public Administration, and “Fade to Black? Exploring Policy Enactment and Termination Through the Rise and Fall of State Tax Incentives for the Motion Picture Industry” published in the journal American Politics Research.
The first study concludes that tax breaks have little effect on boosting pay or increasing the number of jobs in the industry. States that tried to draw film and TV production from Los Angeles and New York via tax incentives largely failed over the long term, it found.
“After a state has invested tens of millions of dollars, no politician wants to acknowledge that the program is a waste of taxpayer money,” Thom said.
We've also argued that Hollywood, where the average job pays $117,000 a year, can actually be a drain on Los Angeles, whose median income is $27,987. The entertainment industry doesn't begin to reflect L.A.'s diversity, often saving its best positions for white, out-of-state recruits. And it surely contributes to our impossible cost of living, high rents and ridiculous real estate prices. Tax incentives only exacerbate Hollywood's disproportionate wealth (and whiteness).
The second study looked at what happened when some states ended their film and TV tax incentive programs. “Most of the states that terminated their programs had significantly reduced the incentives over time and had seen unemployment decrease,” the research concluded.
In other words, as the taxpayer-funded gravy train left town, the job situation actually got better.
“We looked at job growth, wage growth, states’ share of the motion picture industry, and the industry’s output in each state,” Thom said. “On average, the only benefits were short-term wage gains, mostly to people who already work in the industry. Job growth was almost nonexistent. Market share and industry output didn’t budge.”