I wasn’t going to blog this, because it’s not like Matt Welch needs traffic from me, but moral consistency (and an instinctive desire to tweak Ann’s reflexive ‘protect all Democrats’ instincts) forced my hand.
Short version: Gov. ‘SkyBox’ Davis offers $650 Million to Movie Studios.
Now this is something I know little bit about, and the reality is a) that the costs of production in Canada are lower in part because of the Canadian/U.S. dollar spread, and b) because the Canadians gave a significant tax incentive to produce there. Davis proposes to offset this with a state tax credit.
I’m not inherently opposed to tax credits or other government incentives. But the sad reality is that they more often reflect the desire of politicians to be close to those incented…often to ensure the steady supply of donations…than any kind of reasoned effort to grow the economy.
So the incentives often go to the places that need it least…sugar growers, as a good example. There’s actually a great quote from this article: “The U.S. sugar program is the most efficient tax we have,” says Kempner with bitter sarcasm. “It comes directly from consumers and goes directly to the growers, who turn around and give some of the money to the politicians. It never goes through Washington at all.”.
The film (and music) industries have been critical to the health of the California economy. Sadly, they are facing huge structural challenges right now, as anyone who reads Instapundit or Eric Olsen knows. There’s a huge budget shortfall in the state. You gotta ask yourself; is this the right place to spend our cash right now? Well… is it, Governor?
Date: 08/12/2002 00:00:00 AM
AL:I don’t know about the MOW example, but for feature films (such as the one I just filmed in Budapest) the difference in the tax incentive is the difference that gets the picture made. We could not have paid our stars what they demanded and still had money enough to film the project without the UK co-pro funds. (It so happens that our story took place in Budapest and had to be shot there anyway)If we had not needed Budapest as a location, we would have had no choice but to shoot in Canada where we could pay our talent and still get the production value we needed.The amount of money we were able to get based on our actors was not enough to allow us to pay them and still film in LA. All things being equal, we would prefer to film in town, of course. This bill makes that more likely to happen, and bottom line brings more work back to LA whether a network pockets the difference on MOWs or not. Incidentally, actors (stars) are very aware of what the budget of a project will be as they do not want to be involved in something that has low production value.
Date: 08/12/2002 00:00:00 AM
Brian, bro…I have to disagree. I’m trying to get my act together to get out of town, but will promote your comment and respond soon……ah, hell. Short version: The Canadians give a 30% tax credit on direct expense (pretty well maps to below-the-line); as I recall, the above/below/post ratio varies depending on what’s being done, but for a typical MOW (Movie Of The Week, the most commonly exported productions) it’s something like 30/50/10 – Brian am I right on this?So the Canadians give back 30% of 50%, or 15% of the total cost…meaning that a typical $6 MM production winds up costing $5.1 million.Now the team has a choice…they can oimprove the quality of the goods, as Brian suggests, or they can sell the same number of commercials based on a product that cost 15% less.Sounds more profitible to me. From the above-the-line POV (where Brian lives) it is more likely to get made for $5.1 than for $6, which means he gets to work, too.More thoughful response later…A.L.
Date: 08/12/2002 00:00:00 AM
Describing this as corporate welfare is not accurate. There is a unique situation in Hollywood with regard to “runaway production”. Here’s how it works:When a producer sets a budget for a film, the “above the line” costs (stars, director, producer, etc.) are basically set by the extant quotes that the stars get paid, and by the percentage of the budget that is normally paid to the producers, writers, etc. “Below the line” costs refer to all the money spent on lights, sets, location fees, catering, make-up, wardrobe, etc.Whether the film is shot in LA or in Toronto, the “above the line” costs remain the same, but the “below the line” costs can be very different. One of the main reasons this is so is the tax credit offered by the Canadian government, or the co-production refunds offered by the EU countries. As a result, the only people who benefit from tax credits are the craftsmen and “below the line” workers who live in the State of California, and the costs to the corporations that are producing the film are essentially the same. If my film is going to be budgeted at 10 million dollars, that’s what I will spend. My fee, and the profits of the studio are unaffected by where I shoot my film. But if I can get 1 million in additional “below the line” value up on the screen from tax incentives, why would I not choose to film in Canada? The bill under consideration here in California will simply make it more likely that I as a producer can stay in LA and spend my 7 or 8 million in “below the line” money here rather than in Toronto. These figures I’m using are hypothetical, but not far off, and it strikes me that a 1 mil credit to infuse 7 mil into the local economy and keep LA residents gainfully employed is a pretty good deal. The important distinction here is that the lost revenue fom a tax break does not effect the bank accounts of the studios or producers but will, in fact, benefit the local economy.Casting this issue in such a way as to make it sound like millionaire movie moguls are getting a tax refund is silly. Trust me, I know some of these Hollywood Mogul guys, and they could give a shit where they shoot their films. But I also spent fifteen years as an artist “below the line” before becoming a producer, and I can tell you that the middle-class, blue collar worker in the film industry is hurting right now, and when they hurt, the owners of restaurants, dry cleaners, and other merchants in their neighborhoods hurt as well.
Date: 08/11/2002 00:00:00 AM
as one who makes a living (or tries to) in the “biz” as we say, i am in favor of tax credits to keep production in the state. to be honest, i am not against productions going to other states in the us to save money, besides, as a movie/tv consumer, i am always happy to see new backgrounds/cities/light in the product. but as an american, i am naturally and even knee-jerkedly against any companies taking any jobs away from us citizens (especially us actor-americans).
Date: 08/10/2002 00:00:00 AM
Actually your post doesn’t tweak me at all. You set forth the pro and con reasons for the tax credit. (Don’t forget that production companies have also been going to places like North Carolina to avoid having to hire union actors and crew.) That after an indepth? review you concluded that you were against it. Fair enough. Fact is, there are low priority tax credits littered throughout every legislative session. (Really, read the Jay Michaels/Dan Walters book.) And read this. What the hell is a “Spaceport Development Zone?”That Hollywood may contribute to Democrats more than Republicans does not mean that this tax credit is a useless boondoggle, as you yourself recognized. Don’t let the Right and the media sucker you. If you want to fight against awful tax credits, there are plenty of others to be found.