Cold Water Thrown On California Film & TV Tax Credit Expansion By Non-Partisan State Analyst

Efforts to expand California’s $100 million Film and TV Tax Credit Program took a bit of a dousing today from the state’s Legislative Analyst Office. While not explicitly recommending nor rejecting the current legislation that’s moving through the state Assembly, today’s report says that “if the Legislature wishes to continue or expand the film tax credit, we suggest that it do so cautiously.” The 24-page report from the non-partisan office also takes a bigger-picture view that cast the “flagship” movie and TV industry as but one of many in the state in possible need of assistance. “Instead of approaching economic policy on an industry-by-industry basis, the Legislature may take actions that encourage all businesses to stay or relocate to California, such as broad-based tax reduction or regulatory changes.”

Related: New Film & TV Tax Credit Bill Unanimously Passes First Hurdle

The current program was introduced in 2009 in an effort to try to halt runaway production and lucrative challenges from states such as Georgia and Louisiana as well as Canadian provinces and countries like the UK.

Related: California Official Dodges Governor’s Stance On Film & TV Tax Credit

Today’s LAO report expresses doubt about the overall economic benefits of tax credits for the film and TV industry and whether they actually pay for themselves. It also worries about the “data limitations” on research to gauge the decline of the industry in the state is and warns against a “race to the bottom” with other states in terms of providing competing subsidies. “If a film project was attracted to the state because of the tax credit, and would not have otherwise filmed in the state, the economic benefit of the film is calculated based on how its spending trickles through the economy — a phenomenon called the multiplier effect,” points out today’s report. “However, the existence of a multiplier effect does not imply that the subsidy generates economic gains that are greater than its costs.” (more…)

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