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Calif. losing millions as films leave state -study

Posted on: Monday, 22 August 2005, 18:31 CDT

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.

Source: REUTERS

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