This article is filled with irony from this conservative’s perspective. Los Angeles, Calif., has been the home to the movie industry since before I was born. LA’s new mayor, though, sees the signs that California’s oppressive taxes is hurting his city. In fact, he’s panicking over it:
Hollywood’s homegrown industry is being ceded to other states and countries whose favorable tax credits are increasingly luring away movie and television production at an alarming rate. As competition both in the U.S. and abroad continues to grow, the state’s market share and longtime stronghold on production jobs and spending are fast evaporating.
The simple reality is that tax rates matter. Hollywood isn’t making films because they’re altruistic. They’re attempting to make as tons of money. California’s oppressive taxation is cutting into these companies’ profits:
These days studio chiefs insist that filmmakers they work with take advantage of out-of-state incentives to lower production costs, which on a single major motion picture can amount to savings of tens of millions. Those savings are crucial in a franchise-obsessed era when big-budget movies commonly cost north of $200 million to produce, while on the revenue side the DVD market has largely collapsed and cinema attendance has been generally flat over the past decade. In the current climate, most independent projects would not even be produced without incentives.
This cuts to the heart of the matter. Production companies are going where they stand to make the most profit. If other states offer better incentives, that’s where these companies will go. Rather than offering special incentive packages, California can get these jobs back by simply offering a better tax rate. Unfortunately, that isn’t likely to happen:
“Tomorrow we are not going to wake up with an unlimited cap on credits,” Garcetti says. “But we have to show forward progress, and I am going to be like a dog with a bone on this and stay with this. I can’t single-handedly move Sacramento, but I think we will do what works to educate our lawmakers…that this is a huge shot in the arm for our economy to land a lot of this back.”
Skeptical lawmakers can say that the state already has done what it can: its $100 million-per-year incentive program may not match those of other states (New York’s is about $420 million) but is certainly better than nothing. California elected officials renewed the program, in the midst of ever-tight state budgets, twice. The most recent renewal, a two-year extension to 2017, was passed overwhelmingly even after a state legislative analyst report concluded that the economic benefits of providing incentives would be a wash, or even a slight net loss, to the state’s coffers.
California’s biggest problem is that they’re spending billions of dollars on the trendiest things, things that don’t create jobs. Green energy companies were supposedly California’s newest contribution to the national economy. Instead, they’ve been a total bust.
California spends literally billions of dollars on lavish public employee pensions. Cities have declared bankruptcies as a direct result of these obligations. In order to pay those obligations, California has raised tax rates. They’ve decided that paying these lavish obligations is more important than creating private sector jobs. For that matter, they’ve decided that it’s more important to pay these lavish pension benefits than it is to hold onto jobs that they’ve had for decades.
Until they change their priorities, Californians will continue losing jobs and Eric Garcetti’s crisis will get worse.