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CA Doesn't Need Those Film Tax Incentives


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According to "Liberal think tanks", "Washington studies" and the geniuses in Sacramento, California isn't suffering any job losses from runaway production in other states?

All they had to do was check with the many technicians in Los Angeles and ask.

The L.A. Times headline reads;

Do Hollywood tax credits really help the economy?

Capitol's number crunchers wonder if proposed $200 million in subsidies could be used better elsewhere.

http://www.latimes.c...0,5860362.story

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I doubt that any state/local tax incentive, whether it's for a movie production or a car plant or a football stadium, is really worth it in terms of return on "investment" but it does make people feel good to be able to say that the latest blockbuster was filmed in their area or that their NFL franchise won't be moving to Boca Raton. If a job paying a sound mixer $30K costs the state $300K it'd make more sense to just give the mixer the $30K...

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I realize many people here view this as jobs leaving their home town in California.

This debate is never going to end. From my perspective, there seems to be different ways to do tax incentives. Some states claim they are making money on the deal. Pennsylvania has had tax incentives under Democrat and Republican Governors. The current Republican stopped them when he took office in a very public "no more handouts to Hollywood millionaires", but then reinstated them. I don't know if he thought the jobs would be here anyway, or what, but his people agree that they work. The way they are done here in PA supposedly show positive money on paper, let alone the other "values". The other values could (arguably) be promoting the city, tourism bla bla bla. The funny thing about that.... a LOT of the films shot in Philadelphia are played as NYC. Mix in a few exterior NY shots and the general viewing audience will never know it was shot in Philly. Dark Knight Rises was shot in Pittsburgh, but played as Gotham. Not sure that will generate tourism for them either. The thing with our tax credits is that they only apply to money spent here. The money that goes to pay the imported cast and crew gets no tax breaks. No breaks for money spent on gear rented from NY. The tax breaks are for the PA residents hired, money spent here on hotels, catering, equipment, plywood, gasoline bla bla bla. Maybe Pa drafted a better plan than most states, and that's why ours are self sustaining. I don't know. I know some states just threw money at the wall to see if it would work. Pennsylvania is also a very diverse state in the sense of two big cities, and a lot of farmland and forests in between. Lots of options for locations.

To be honest, it is weird how these Film Tax Incentives become a political scapegoat that gets a ton of traction, but nobody cares about the massive tax breaks that other things get. Here in PA the newish Republican Governor keeps pushing for tax breaks for a new struggling industry that was the fracking natural gas drillers. These corporations that "need our money to start a business" are Halliburton and most of the major oil companies, and the smaller companies they hire to drill their wells. Nomadic drilling crews that have come up from Texas (NOT Pennsylvania residents). The oil companies are still getting billions in government incentives while being some of the most profitable companies in the world. Compared to them, the film credits are nothing.

States like the Carolinas have tried to poach factories for decades with huge tax incentives. My father's relatively small machine shop got constant mailings and phone calls from other states trying to get him to up and move his business to their states. Their plan obviously did not include him bringing each and every employee. Is that bad, or is it individual states being competitive to provide the beast deal? I personally don't like when businesses leave urban areas to go clearcut a forest and continue suburban sprawl, but that's just me. That's been the federal plan in this country since the end of WWII.

Tax incentives are up to the individual states, so there really isn't any way to "stop them". Even before tax incentives, there were a certain number of films, and TV shows, shot on locations.

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I doubt that any state/local tax incentive, whether it's for a movie production or a car plant or a football stadium, is really worth it in terms of return on "investment" but it does make people feel good to be able to say that the latest blockbuster was filmed in their area or that their NFL franchise won't be moving to Boca Raton. If a job paying a sound mixer $30K costs the state $300K it'd make more sense to just give the mixer the $30K...

I don't really see your point of view. Sound mixers aren't the only people production will higher as locals. And bringing more film work into your state means that more film workers can live there. That's canstant tax and local economy boosts from residents who might not get enough work to live there otherwise.

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huh?

If your state allows a $300,000 deduction and that deduction results in one job that pays one of its citizens $30,000 then the state is out $270,000.

The whole tax incentive thing got out of hand a long time ago and in a sensible world would be eliminated by federal law (not gonna happen). States should compete on things like worker availability and talent, land and infrastructure availability, things that are real. All they seem to be doing at present (aside from R&D incentives that generate new technologies) is create yet another race-to-the-bottom to see which state can kiss some industry's ass better than its neighbor.

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are the organizations representing labor making an effort here?

they dont seem to dominate the conversation with the moral (cultural ) imperative to save Hollyweird.

asleep at the switch ? or am I deaf?

w

latimes.com/news/local/la-me-hollywood-tax-credit-20120906,0,5860362.story

latimes.com

Do Hollywood tax credits really help the economy?

Capitol's number crunchers wonder if proposed $200 million in subsidies could be used better elsewhere.

By Evan Halper, Los Angeles Times

6:04 PM PDT, September 5, 2012

SACRAMENTO — As Gov. Jerry Brown mulls whether to sign into law another round of subsidies for Hollywood production companies, the question that confronts him is how much each job on a movie set is worth to taxpayers.

In Massachusetts, lawmakers recently discovered a similar program was much more expensive than they thought. After years of subsidizing film productions without looking too closely at how that was helping the economy, state officials put it under a lens and found that taxpayers were spending as much as $300,000 to bankroll each position.

Other states that went in for a close-up after dispensing hundreds of millions of dollars in tax breaks found that every public dollar put into the film industry was generating a few dimes, or less, in revenue.

Boosters of California's tax breaks for filmmaking say they cost just $10,000 for each production job that would otherwise disappear from the state, an investment that more than pays for itself when the workers file their tax returns and spend their earnings. But some of Sacramento's most trusted number crunchers say the cost could be considerably higher, questioning whether the tax benefit to production companies provides any economic boost at all.

"Runaway production" — the flight of some filmmaking to cheaper states — has played a role in California's double-digit unemployment rate. But as the available government dollars continue to shrink, Hollywood is being challenged to prove that the plan for $200 million more in subsidies that lawmakers sent to Brown last week would not be better spent preserving other kinds of jobs.

"The state is using money it then can't use for other things, like education, transportation and healthcare, which also create jobs and economic growth," said Nicholas Johnson, vice president for state fiscal activity at the Center for Budget Policy and Priorities, a liberal think tank in Washington, D.C. "There is no accounting for what else the state could be doing with those dollars to provide economic growth."

The measure, AB 2026 by Assemblyman Felipe Fuentes (D-Los Angeles), would extend the existing $100 million annual tax break for two years, until 2017. Supporters say the credit, which Brown has until the end of the month to act on, has a "multiplier effect" on the economy.

"It brings so much associated investment and job creation in all the industries that benefit," said Barry Broad, a labor lobbyist and part of a coalition that includes the Directors Guild of America and the Screen Actors Guild, which is urging the governor to sign the bill. "Tourism, hotels, restaurants, equipment rental — it is just a huge benefit."

Proponents also note that a decade ago only a few states offered tax breaks intended to lure film productions. Now, some three dozen do.

If California withdraws its subsidy, they say, the industry will more quickly migrate elsewhere and harm the industry overall.

The California tax break "impacts the confidence of this industry and whether a talent pool of people will remain here," Broad said.

And the Motion Picture Assn. of America cites a study it commissioned by the major accounting firm Ernst and Young that says the tax credit should not be judged only by the revenue it helps generate in the short term.

"The primary benefits of film credits accrue to the private sector, not the public sector," it says. "The relevant policy question in evaluating film credits should be, 'Do the residents of the state get a good return for their investment?' and not simply, 'Does the investment pay for itself in terms of additional state tax collections?' "

Officials at the association, which is taking the lead for studios in promoting the credit extension, declined comment.

Some of the state government's top tax experts say the industry's claims are overblown. The nonpartisan legislative analyst's office, which both Democrats and Republicans look to for frank and reliably independent financial advice, recently produced a report declaring the proposed credit extension a net loser.

The report said each dollar spent on film tax credits is bringing back less than a dollar to the state treasury and "perhaps well under $1.00 in many years." It also ripped into the much-repeated finding by the Los Angeles County Economic Development Corp. that 20,000 jobs have been created by the tax credit for California film productions, which went into effect in 2009 and has so far cost taxpayers $300 million.

The county report assumed all of the subsidized jobs would not have been created without the credit. The analyst cautioned against that assumption, saying that it meant the benefits of the program may be "dramatically overstated."

Several productions that entered the lottery for the limited tax credits but did not receive them went on to shoot in California anyway, suggesting the credit was not essential to job creation. Five of those productions spent $20 million in the state, the analyst said.

In addition, the California Research Bureau, an independent agency that studies policy issues for the Legislature and administration, last year questioned the assumption that tax incentives in other states were luring California film jobs away.

It produced a study noting that growth in California's film industry exceeded that elsewhere from 2000 through 2009, when other states were most aggressively pursuing incentives and trying to take productions away.

The industry's employment and wage data, it said in a report, "do not provide clear evidence that any significant damage to the state's industry or economy has resulted from efforts by other states to draw movie production away from California."

The Tax Foundation, a conservative think tank in Washington, noted in a review in April that the majority of studies not bankrolled by industry-affiliated groups or local authorities eager to attract productions have found the credit's performance lackluster.

Government studies in Arizona, Connecticut, Massachusetts, Michigan, New Mexico and Pennsylvania concluded that every dollar invested in the tax credit was returning less than 30 cents in revenue, the foundation noted.

Even the staff assigned to the lawmakers who passed the proposal for an extended credit appear ambivalent. Their report noted that two of the states trying to attract California productions with generous incentives — New Mexico and Louisiana — saw film employment fall far more precipitously during the recession than in the nation overall.

Their analysis raised the question of whether Hollywood firms that already enjoy numerous tax advantages should get another break and took aim at some of the "opaque" accounting maneuvers used by the studios.

"Forrest Gump," one of the industry's highest grossing productions, showed no profit on the books, the analysis noted.

"Perhaps the highest level of creativity in Hollywood," it said, "is the creative accounting."

evan.halper@latimes.com

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are the organizations representing labor making an effort here?

they dont seem to dominate the conversation with the moral (cultural ) imperative to save Hollyweird.

asleep at the switch ? or am I deaf?

Well, I can't address what the Local might have done very recently. However, I can state that I accompanied Scott Bernard to Sacramento to actively lobby in favor of AB1069, the bill sponsored by Assemblyman Felipe Fuentes. About ten IATSE locals heeded the call from Thom Davis and sent representatives along with SAG, AFTRA, the Teamsters, and the Director's Guild. You may find an account of that effort in the Fall 2011 edition of the 695 Quarterly.

You may find that issue online here:

http://695quarterly.com/previous-issues/

(The issue with Willie Burton on the cover)

David

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I think that in an industry where production equals gambling in many respects, throwing tax dollars to court producers to shoot in one state or another is suspect.

That said, if one state is doing it, and then another, and another, it becomes the de rigueur thing to do; if your state isn't doing it, then people leave, your tax base continues to erode, the downward spiral of budget cuts continues, and so on.

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Just realized something. When I started out productions flew their mixers in from the major cities. Now though, I've noticed a lot of companies just hiring local mixers no matter where they go. Could it be that they are doing this to get the most out of what ever incentive program is going on in the state. So many states have one now. If it has anything to do with the amount spent, which I'm sure it does, then hiring a local sound mixer is guaranteed to have a good return. Out of any local they'll hire the mixer will probably have the highest daily cost between rate and especially if they are supplying gear. Local mixers hires should be pushing for even more money in this case.

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Hemmerlinj:

To most, it's all about saving money. One less plane ticket, no excess baggage fees, less food bought, one less hotel room, maybe a small car rental. It all starts to add up. Most don't care about the equipment brought to the shoot as long as it's a mixer two wireless mics and a boom, they just want the audio to wind up on the media with no problems. Some times they will call all the locals looking for someone willing to work for their rate, the rate they seem to pay from where they came from eventhough you would go broke working for that rate in that local. Try to push your rate gets a sorry, but were going to the next guy. It's been explained hundreds of time here before.

Scott.....

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I thought I would follow up on my post about lobbying in Sacramento with an image of various IATSE representatives at the Statehouse.

Union members spent much of the day going from office to office attempting to persuade representatives to support AB1069. When the representatives were called to an active session, the union people congregated in the hallway outside the assembly room, each holding a picture of a film worker who lost employment when projects migrated to states with production subsidies. From left to right we have Paul Ahrens, Assistant Business Agent of IATSE Local 44, Thom Davis, International Vice President and Business Agent of Local 80, (unidentified), Patric Abraravich, Business Agent of Local 728 and Scott Bernard, Assistant Business Representative of Local 695.

By the way, there's a very eloquent letter on the subject in today's LA Times, available here:

http://www.latimes.c...0,7517943.story

David

post-16-0-04279700-1347134321.jpg

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If your state allows a $300,000 deduction and that deduction results in one job that pays one of its citizens $30,000 then the state is out $270,000.

The whole tax incentive thing got out of hand a long time ago and in a sensible world would be eliminated by federal law (not gonna happen). States should compete on things like worker availability and talent, land and infrastructure availability, things that are real. All they seem to be doing at present (aside from R&D incentives that generate new technologies) is create yet another race-to-the-bottom to see which state can kiss some industry's ass better than its neighbor.

I get what you're saying now -- sorry, it was a little hard to follow initially... in any case, I don't know how the incentives work in (Nebraska?) but here in the NW, a production is only given $ based on the $ they actually spend in the state -- and they're extremely vigilant about verification -- item by item proof that the $ was actually spent on local crew, businesses, etc... so I guess the scenario you describe doesn't really apply to all incentive programs. It's not like the State just cuts a million dollar check to a 5-million dollar production -- that would be really really unwise -- for many reasons.

~tt

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I realize many people here view this as jobs leaving their home town in California.

This debate is never going to end. From my perspective, there seems to be different ways to do tax incentives. Some states claim they are making money on the deal. Pennsylvania has had tax incentives under Democrat and Republican Governors. The current Republican stopped them when he took office in a very public "no more handouts to Hollywood millionaires", but then reinstated them. I don't know if he thought the jobs would be here anyway, or what, but his people agree that they work. The way they are done here in PA supposedly show positive money on paper, let alone the other "values". The other values could (arguably) be promoting the city, tourism bla bla bla. The funny thing about that.... a LOT of the films shot in Philadelphia are played as NYC. Mix in a few exterior NY shots and the general viewing audience will never know it was shot in Philly. Dark Knight Rises was shot in Pittsburgh, but played as Gotham. Not sure that will generate tourism for them either. The thing with our tax credits is that they only apply to money spent here. The money that goes to pay the imported cast and crew gets no tax breaks. No breaks for money spent on gear rented from NY. The tax breaks are for the PA residents hired, money spent here on hotels, catering, equipment, plywood, gasoline bla bla bla. Maybe Pa drafted a better plan than most states, and that's why ours are self sustaining. I don't know.

Just to clarify, Pennsyvania's film incentive does not make more money for the state than it costs. All of the reports prepared by the state's film office show way more is doled out than is returned in new taxes: http://filminpa.com/resources/industry-analysis-reports/

On "The Last Airbender", for example, the state paid out over $37 million and got back just $10 million from all of the economic output from the production (yes, that included the ripple effects too). Just on that one film, it's a loss of $27 million: http://www.stop-runaway-production.com/2012/09/14/film-incentives-101-they-have-little-to-do-with-taxes/

Also, all wages paid to ABL or BTL qualify for the program regardless of worker residency. So yes, Penn is subsidizing the wages for nonresidents (not to mention their travel to the state and their lodging). And the state does, in fact, pay for good and services from out of state vendors....so long as the transaction takes place in the state. Rather than rent props in NY, the prop house gets opens a shell office or files as a llc, ships in the props and gets paid for them in Penn rather than NY. It's literally that simple.

The worst abuse of the program I know of was a $70 million expense that was covered for VFX work done by ILM in Northern California. None of the work ever took place in Penn, but they opened a temp office and took payment there so it qualified. And poof, just like that roughly $17 million was paid out on that expense for work done entirely in California.

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Wouldn't it be cheaper to just give that $27 million to a bunch of local filmmakers then?

It seems like such a stupid way to try and create a non-existing industry.

Thing is, teh minute the tax incentives dry up, the industry disappears, as none of the producers are wanting to

I've full time in those places.

They come back to SoCal, and find other ways to save money.

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  • 2 years later...

As a Texas who benefits from a tax incentive as well, I think they're kind of dumb because the money they potentially bring is so transient.  There's no incentive to actually establish a business here, just an incentive to temporarily run a production here.  Shortsighted IMO.

 

I'd much prefer a tax incentive that rewards production and video game businesses with property tax credits and full time hire credits.

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As a Texas who benefits from a tax incentive as well, I think they're kind of dumb because the money they potentially bring is so transient.  There's no incentive to actually establish a business here, just an incentive to temporarily run a production here.  Shortsighted IMO.

 

I'd much prefer a tax incentive that rewards production and video game businesses with property tax credits and full time hire credits.

Pwhich is why they want to remove TV production form the cap.

BecauseTV work DOES provide a longterm industry.

Unlike movies, which come and go quickly.

Hell, I would push all incentives towards TV.

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