State Issues

September 4, 2014

Taxpaying Californians now footing the bill for Hollywood moguls

We’re making major motion pictures, baby! TV shows, too!

We’re making major motion pictures, baby! TV shows, too!

My fellow California taxpayers, you and I are now major investors in film and television productions. Our agent – or I should say our 120 agents in the state legislature – cut a five-year deal last week putting more than 1.5 billion of our hard-earned dollars, via tax credits, into the production of on-screen entertainment.

Of course, financially speaking, this investment is a bad deal. Entertainment is a stagnant business these days, with declining movie ticket sales and TV ratings. Plus, we’re breaking the cardinal rule of Hollywood: Never use your own money. The existing tax incentive program, at $100 million a year hasn’t stopped production crews from migrating to other shooting locales, nor have longstanding sales and property tax exemptions. So now we’re betting, as Hollywood so often does, on a more expensive sequel – even though various studies, including from the state’s own legislative analyst, show that Hollywood tax credits don’t pay for themselves.

Yes, I know there are provisions in the new deal for audits and penalties to guarantee that our investment in tax credits will produce more and better in-state entertainment jobs. But let’s not forget that Hollywood executives are the Rembrandts of creative accounting: Even the most successful movies manage to evade a profit that could be shared or taxed. In a deal between the state of California and an industry that has kept “Return of the Jedi” from booking a profit, who do you think is going to come out on top?

We should remember that investing in the movie business has never been primarily about making money. It’s about buying cache, about laundering money made in less noble enterprises, and about giving older, richer people the chance to interact with the beautiful people who make movies. That’s why our legislators were never going to turn down Hollywood’s insistent entreaties for this new public investment; it’s also why this new program is all but certain to get much bigger, as requests for these tax incentives are expected to far outstrip the $330 million a year in the new legislation.

All that said, there is one obvious omission in the terms of our new investment worth complaining about: You and I have been cut out of the Hollywood fun.

We’re now major Hollywood investors, but we’re not getting the red-carpet treatment.

California taxpayers will be providing 20 to 25 percent of movie budgets. Like other investors, we should get paid back out of the grosses before the filmmakers themselves get their cut – particularly when you consider we’re talking about taxpayer money that would be better spent on schools. But that’s not in the deal – and neither are the producer credits major investors receive. We’re also missing out on perks: You and I should get to meet the stars, visit the set, and get two tickets to the premiere of the movies we invest in. I realize it’s not feasible for a single movie to accommodate millions of taxpayer-investors, but a lottery could dole out some of these perks to the public.

While we’re talking deal points: Would it hurt you to diversify casting to reflect the population of the state that funds you? Couldn’t you step up your philanthropy, especially here at home? Why not engage Californians directly by letting us vote online on which films should receive incentives?

Hollywood needs us Californians to be happy investors, because there is the real possibility of a public backlash against this new deal. Other industries are likely to use your example to press us for their own incentive packages. Hollywood will have a hard time showing a return on revenues and jobs, because there’s so little reliable economic data on the industry.

The good news is that, even if our big investment goes terribly wrong, Californians will have Hollywood stories to tell – and will have learned some useful things, including the priceless lesson that it’s best to keep your distance from rich, cunning, and pretty people. I, for one, have always found it personally instructive that the quintessential film about Hollywood, “Sunset Boulevard,” begins and ends with a newspaperman named Joe (who takes a tragic turn into Hollywood screenwriting) face down in a swimming pool, shot dead by a movie star.

Yes, we Californians are ready for our close-up. But let’s fasten our seatbelts – it’s going to be a bumpy ride.

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