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'Runaway production' is a problem for California, but are big subsidies to filmmakers the best response?

August 01, 2007

Filmmaking was about a $9-million industry in New Mexico in 2002, the year lawmakers in Albuquerque decided to adopt a tax rebate for movie and TV productions in the state. The results have been, well, dramatic. Filmmakers have spent more than $1.2 billion in the Land of Enchantment since the rebates took effect, including at least $475 million in the last 12 months alone.

Other states have seen a similar rush of investment. Connecticut, for instance, had a negligible filmmaking business before a 30% tax credit took effect in July 2006. This year, it expects to see more than $300 million in film and TV production. At least 13 other states and Puerto Rico have joined the hunt by offering financial incentives for movies, TV shows and commercials.

Economic development officials in Southern California argue that the state can't afford to stand idle. They want California lawmakers to fight the "runaway production" trend with tax credits and other goodies that bring down the cost of filmmaking here. Encouraged by Gov. Arnold Schwarzenegger -- whose breakthrough "Conan" films were shot in Spain and Mexico -- the Assembly included more than $145 million in tax breaks over three years in its proposed budget for this fiscal year. It also passed a bill to aid filmmakers with cash grants.

One problem with such proposals is that they can't distinguish between productions at risk of leaving California and those sure to be shot here. A state such as New Mexico that's starting virtually from scratch doesn't have to worry about that; almost every dollar it sacrifices in tax revenue is going to a film that would have been shot elsewhere. But in California, the tax breaks would subsidize thousands of productions that have both feet firmly planted in the state.

Advocates of the incentives say they more than pay for themselves by stimulating economic growth. If so, why stop with Hollywood? Why not throw tax cuts to every industry that's expanding globally, such as chip makers, software firms and car manufacturers?

Granted, California needs the high-paying jobs that the film industry provides. A disturbing number have left the state as producers have sought cheaper locations around the globe. But backers of targeted tax breaks and grants need to make a better case that filmmakers are uniquely deserving of the taxpayers' help, and that a large percentage of the subsidies won't flow to those who don't need the help. They should also explain why financial handouts are the best way to welcome filmmakers to the entertainment capital of the world.

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