States Call ‘Cut’ on Film Credits

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In case you hadn’t noticed, all those generous film tax credits that other states lavished on TV and film producers are on the retreat. They haven’t cratered as dramatically as, say, Donald Trump’s presidential prospects, but they’re definitely dwindling.

Just three years ago, 40 states extended some form of a gimme to Hollywood producers, but that number’s down to 30 and bound to go lower. What’s more, some of those 30 remaining states are tightening their grip on the taxpayers’ purse.

Just last week, Louisiana’s film tax credits were capped at $180 million a year, down from, well, the ionosphere because there was no limit. Bobby Jindal, the governor and presidential aspirant, estimated the new cap will save his state more than $75 million a year and help close his state’s $1 billion-plus budget deficit. I guess it looks better to at least act like you’re fiscally responsible when you’re running for president.

(By the way, Louisiana’s step back from Hollywood is significant. In 2013, that state, for the first time, hosted more big-studio productions than California. “Jurassic World” was filmed there, for example.)

But other states are killing or ratcheting down their giveaways, too, and for reasons beyond their governors’ presidential aspirations. Another reason: persistently low oil prices.

How’s that? Well, some oil-dependent states are hurting, which makes it harder to grease the palms of already well-greased Hollywood types. Alaska iced its film tax credit program recently and the governor there reportedly said he couldn’t justify giving taxpayers’ money to film tycoons while shutting down some state offices.

But perhaps the most important reason for the sudden unpopularity of film tax credits is the growing sense that it was an experiment that flopped.

Jon Hartley, writing last week in National Review, reported that a 2013 study of Canadian tax credits concluded that the program did increase employment in the film industry – but at the expense of employment in other sectors. On the whole, Canadians are poorer as a result. And Michigan, he wrote, has spent $450 million on film tax credits since 2008 but there are fewer film jobs in the state than when the program began. Michigan is expected to end its program soon.

About now, Angelenos may feel emboldened and ready to gloat, self-satisfied in the comforting belief that the entertainment industry, kind of like the prodigal son, will return, sorrowful, hat in hand, seeking our forgiveness.

But we don’t know if that will happen. The entertainment industry, prodigal son that it is, may just stay out there in the distant lands.

Why? Well, producers may have grown comfortable working outside of Los Angeles. They may have come to appreciate the fact that right-to-work states are much cheaper and more flexible to work in, and that those other states have built up the infrastructure and expertise needed to keep the entertainment industry entertained. Producers could conclude that, hey, even with no tax breaks or fewer of them, it’s still a good deal to film there.

Nobody really knows what will happen. It’s nice to think there’ll be a gusher of returning film and TV production to Los Angeles, although so far we’ve seen no evidence of that. Maybe it’ll be a mere trickle.

We’ll find out in the coming months and years how much film and TV work returns to Los Angeles as more states stop or curtail their giveaways. Maybe the entertainment industry will return in a big way, seeking our forgiveness. But maybe it’ll stay in the distant lands.

Charles Crumpley is editor of the Business Journal. He can be reached at [email protected].

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