California Film Subsidies Create Trillions Of Jobs

The media in California have been celebrating recent news about its film subsidy program:

California’s film tax credit program is giving taxpayers a bang for their buck. So says a newly released study from the Los Angeles County Economic Development Corp., showing the state’s tax credit program pumped $3.8 billion into the California economy and created more than 20,000 jobs in the last two years.

Readers of my blog know I always chastise other states and countries for their film subsidy program. Much of the volatility in the VFX industry is caused by film subsidies that artificialize bids.

So I sometimes get the response from readers: “Well what about California?”

It’s true, California has film subsidy program for smaller budget films and I have consistently been against it.

Why?

Well first off, in order to have an effective subsidy, it has to be competitive. Other countries like Canada, UK, and Australia are offering subsidies that will cover 25-40% of production costs.

California’s small subsidy is ineffective because of how small it is. Even if it were big, it would hurt the industry over the long run. While you may have politicians for it now, it will all change when a Republican comes into office and mow the subsidies down as they have in Michigan and New Mexico. Then what?

It’s silly to believe that during a time when the state is making massive cuts to healthcare and education that we should give money to the big studios instead.

What all this news about the California film subsidy program shows is just how easy it is for the big studios to influence the media to report the story they want to hear. Only the LA Times reported this tidbit:

Commissioned by the Motion Picture Assn. of America, the report’s findings were seized on by supporters of the program to build support for a bill recently approved by the state Assembly that would extend funding another five years for the film tax credits, which expires in 2014.

Ask yourself this question, if the MPAA funded a report that revealed film subsidies were money losers (which they are) do you think they would let you know about it? Of course not!

The boom in film production in California has as much to do with subsidies here as it has to do with the removal of subsidies in other states. Once you eliminate the subsidies, production would come back to California. That’s why I feel it would be smarter to challenge other countries’ illegal subsidies instead.

Finally, let me point out the absurdity of the LAEDC. If you remember back a few months ago, they reported the huge loss of VFX jobs here in California.

Well it turns out the numbers they used came from the EDD under the category of “teleproduction and postproduction services” and it’s true there has been a significant drop in jobs from employers in that category.

However, what they failed to do was to actually look at which employers were not represented in that category: Lucasfilm, Imageworks, Digital Domain, Rhythm & Hues, LolaVFX, and LookFX were some of the many post-production companies that were not even included in the study!

Soldier On.

9 Responses to California Film Subsidies Create Trillions Of Jobs

  1. vfxguy says:

    Saying that “film industry subsidies are money losers” based solely on that article in the Economist is a bit disingenuous don’t you think? The Tax Foundation’s report focuses on the practise of states trying to lure productions to shoot there when they have no home-grown industry. This results in no long-term job creation or skills retention and hence only a small increase in tax receipts from the migrating production staff that doubtless will not cover the cost of the incentives in the first place.

    The report has nothing to say about the benefits or otherwise of subsidies offered by the governments of those countries with long-established film and post industries such as Canada, the UK or Australia. In these centers for production there are large, highly skilled and well-paid workforces that are a significant boost to the local and national economies.

    I can’t find any studies that look at these places from an economic point of view. If you know of any, please share them.

    • VFX Soldier says:

      The tax foundation linked to a number of independent studies on the issue by various states. The returns were pretty bad:

      • Arizona’s Department of Commerce calculated 28 cents on the dollar.

      • Connecticut’s Department of Economic Development found a 7 cent return on every $1 spent.

      • Two studies in Louisiana found between 13 and 18 cents on the dollar.

      • Massachusetts’ Department of Revenue found it got 16 cents on the dollar.

      • Michigan’s Senate Fiscal Agency found 11 cents on the dollar.

      • New Mexico’s Legislative Finance Office found 14 cents. (E&Y did a New Mexico study too, calculating $1.50 on the dollar, but having the same problems as their Michigan and New York studies.)

      • Pennsylvania’s Legislative Budget & Finance Committee found 24 cents on the dollar.

      http://www.taxfoundation.org/news/show/27410.html

      It should be no surprise that the governments of the UK, Canada, Austrailia, and New Zealand have any independent studies on the issue – It would show a loss. Politicians support subsidies because the MPAA heavily lobbies politicians for them.

      • vfxguy says:

        Did you actually read my post or are you deliberately being obtuse? I know what the report says, I’m arguing that its findings cannot be extrapolated to regions with a well-established film industry (including California).

        Whether subsidies are a good idea or not is an interesting debate (and while we’re at it, just because one report you read argues that subsidies are illegal doesn’t mean that “many international trade experts agree”), but saying that they are of no benefit globally essentially a bait and switch argument.

  2. VFXcorpse says:

    Nearly all of those studios have since opened Vancouver facilities to grab the tax incentives and work. Problem is it doesn’t mean the work is brought back here nore are they able to import the talent since Canada says they have to hire local talent.

  3. Vfx Jockstrap says:

    You don’t *HAVE* to hire local talent… you can hire foreign. You just don’t get the sweet sweet tax credit for employing expensive foreigners to come to Vancouver.

    I’m surprised the UK/NZ tax credit system didn’t implement that little requirement that Canada has.

  4. Andreas Jablonka says:

    NZ would be very hard pressed finding that many local equally skilled kiwis to fill their ranks. sure they are some, but not as many as WETA needs.

  5. […] the whole article and then read a post I made 4 weeks ago on the issue. I’m kinda flattered that many of the same arguments I made in my post are echoed in the LA […]

  6. The remark about a republican overturning a film incentive is out of line and based on your political perception, not reality. The California incentive was signed by a repub governor. New Mexico’s incentive was begun by the Republican before Richardson, not the dem himself (no one in NM wants to admit this). Palin supported and signed Alaska’s incentive. Jindal is the repub gov supporting the longest and costliest program outside NY. Perry gets credit in Texas. Romney backed it in Mass. Corbett, the repub, is the savior of Penn’s credit and wants to expand it. Florida, repubs. Georgia, repubs. Dem Chafee in RI wanted to axe it. Brown may veto in CA. The new Dem in Mass hit resistence to his plan to reduce it. And on and on and on. We argue on legality (reality does not support your claim, however), but on the politics you are flat wrong. I saw the same rhetoric out of New Mexico. Do you just assume republicans hate Hollywood, or do you just want them too? Idiots like Palin are attacking rich celebs when they rag on “liberal Hollywood”. you would be better off doing the same….if a star would take $5 million to stay in CA rather than $10 for somewhere else, they could help solve the problem. In short, you have a better beef with liberals than you do republicans on this issue.

  7. […] these numbers and they are paid for by the parties that benefit from the subsidies the most. California and many other states in the US try to do the same […]

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