Calif. losing millions as films leave state -study

LOS ANGELES (Reuters) – California loses millions of
dollars in tax revenue when filmmakers leave the state,
according to a study released on Monday that bolsters the case
for a tax credit favored by Republican Gov. Arnold
Schwarzenegger.

In recent years, film and TV shows have increasingly headed
from California to other states and Canada where tax incentives
make production less expensive than in Hollywood.

In Louisiana, for example, production expenditures rose
from $12 million in 2002 to $330 million in 2004 after the
state adopted incentives.

With a former movie star in the governor’s office, a new
California bill offering tax breaks and sponsored by Democratic
State Assembly Speaker Fabian Nunez is seen as having a chance
to succeed.

Twice before, California legislators have failed to pass
tax incentives. Opponents say it would line the pockets of
already wealthy Hollywood producers at a time when California
faces a budget crunch, and they question whether the state
truly is hurt by “runaway production.”

The new report released by the California Film Commission,
a state-sponsored group that promotes in-state filmmaking, is
the first to quantify lost tax revenues. Previously, incentive
backers have stressed that the state loses jobs when film and
TV production goes elsewhere.

UP TO $3 MILLION PER FILM

The study showed that a film costing $70 million adds at
least $10.6 million in tax revenues to state coffers. A $17
million film brings at least $1.8 million in product sales tax
and payroll income tax.

A one-hour TV drama budgeted at $2.2 million would generate
$260,000 in tax revenue to the state, according to the report.

“We wanted to show there are more than just jobs being lost
– state and local tax revenues are being lost, too,” said Jack
Kuyser, chief economist with the Los Angeles Economic
Development Corp., which conducted the research.

The bill sponsored by Nunez would offer a tax credit of 12
percent on wages and other production costs up to $3 million
per film or TV show. Under some conditions, an additional 3
percent credit could be applied.

Lenny Goldberg of The California Tax Reform Association, a
public employee advocacy group, questioned the credit by noting
that while film production is down in the state, TV production
is at a high.

“It’s going to be rewarding activity that’s already taking
place in California … so there is nothing but revenue being
given away,” Goldberg said.

For Sacramento Bee newspaper columnist Dan Walters, the
bill “is just a handout to some of the state’s wealthiest
residents.”

The wooing of filmmakers by rival regions harkens back to
the early 20th century when filmmakers headed west from New
York and New Jersey to southern California where various
factors made movies less expensive and more efficient to
produce.