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The Rubes in L.A. City Hall Have Swallowed Hollywood's Hard-Luck Story

April 28, 2005|Matt Welch | Matt Welch is an associate editor of Reason magazine.

Remember when Hollywood liberals claimed to care about the world's poor? Man, those were the days.

Now the richest people in Southern California, who sit on top of a booming $35-billion industry, are using their impressive political clout to punish the struggling citizens of South Africa, Mexico and Romania for having the nerve to think that their tiny domestic film industries could so much as bite Hollywood's ankles. And our politicians are falling all over each other to service Hollywood's poor and huddled masses, doling out heaps of protectionist corporate welfare that our government cannot begin to afford.

In Los Angeles, Mayor James K. Hahn chose the latter stages of his grim runoff campaign to blurt out a harebrained proposal for the city to give filmmakers up to $625,000 each time they make the brave decision to locate a production in the movie capital of the world.

The subsidies would amount to $15 million a year in cash giveaways to an industry that has managed to survive for 100 years without them. This from a city that is facing a structural deficit of $300 million ("structural" being government-ese for "too big to actually fix"). Last November, Hahn's City Hall dished up a slab of pork to Hollywood when it granted a tax exemption for film industry workers who earn up to $300,000 a year, and a targeted tax break for productions costing less than $12 million.

Like all "runaway production" legislation, these giveaways are supposed to somehow pay for themselves. In the real world, however, that missing tax revenue has to be made up in the budget, whether in increased city fees, reduced services or higher taxes on less-glamorous industries.

It's important to note that the politicians are trying to fix something that isn't broken. According to the Entertainment Industry Development Corp., the nonprofit organization that coordinates shooting in Los Angeles, local film production reached an all-time high in 2004, up 19% over 2003.

Location shooting in places such as Canada and the Czech Republic has largely been spurred by the fact that it is cheaper there. But the strong dollar of 2000-2002 has, in the last few years, plummeted 35% against the Canadian dollar and more than 50% against the euro, erasing the outsourcers' biggest advantage. And some economists are predicting a further dollar slide, if not an outright collapse.

Fluctuating exchange rates, you might notice, affect all U.S. businesses, and not just those within walking distance of Sunset and Ventura boulevards. Yet Hollywood has been singled out for special protection by one of the biggest runaway-production veterans in the biz: Gov. Arnold Schwarzenegger.

The state's chief executive, whom I once witnessed answer a campaign question about what he'd do for California Latinos by bragging about shooting four films in Mexico, is expected to unveil a new round of tax breaks directed at the entertainment industry any week now.

Enough already.

If Mississippi and South Carolina want to offer government giveaways to Hollywood, well, that's what desperate, second-rate states do. If a hardworking Romanian wants a movie job, I don't want my tax money used to block him. And if subsidies and protectionism were the keys to a successful film industry, the Canadians and the French would have overtaken Hollywood years ago.

People have been trying for a century now to compete with Southern California's climate, physical beauty, architectural variety and creative vitality. No one's come close yet. City Hall should fix the real-world craters on my street instead of the fantasy problem of runaway production.

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