AB 1839: An Incentive for Good Jobs

California Tax Breaks — What’s Wrong With This Picture?

Amid continued squabbling over whether to boost the California film and television production tax incentive program, the state legislature just handed aerospace giant Lockheed Martin Corp. a whopping $420-million tax break.

Yes, you read that right: A bill creating a 15-year sweetheart deal — for a single private company — sails through the Assembly and Senate without a hitch, yet the fate of Assembly Bill 1839, which would enhance California’s existing entertainment tax credit program and generate millions in additional revenue, continues to face opposition in Sacramento.

What’s wrong with this picture?

It should be a no-brainer that, in order to remain competitive in the global market for film and television production and post-production work, California needs to boost its incentive program. Once the epicenter for entertainment production, California no longer assumes this leadership position. More than 40 other states and 30 other nations offered nearly $1.5 billion in tax incentives last year alone to lure jobs and wages out of California.

California’s current tax incentive program doles out $100 million a year, a considerably small sum compared with incentives given out in the U.K. and in states such as New York, whose $420-million incentive program is currently the largest in the nation. The numbers speak for themselves: Between 2004 and 2012, when domestic film incentives began to take off, California’s base in film-production employment declined from 152,525 to 136,388 jobs in absolute numbers — a loss of 16,137 jobs. At the same time, California’s main rival, New York, added 10,675 jobs in film production, a growth of nearly 25 percent over those eight years.

Meanwhile, California’s production numbers continue to plummet, causing the state to lose thousands of middle-class jobs and significant tax revenue. Because of more attractive tax incentives offered by other states and nations, the percentage of films made in California has shrunk from 66 percent to 40 percent in just a few years. According to the California Film Commission (CFC), “Without adequate funding for the tax credit program, California will continue to lose direct spending and tax revenues from film and TV productions that choose to film elsewhere.”

Without a competitive production incentive, workers in California’s entertainment industry are left with few options. A recent study by the Milken Institute finds:

[tabs type=[tab_title][tab]Ultimately, the main losers in the outflow of productions are local workers, who are forced to make a choice between abandoning the entertainment industry as a primary source of employment, moving to other states, or attempting to keep their homes in California while working on projects elsewhere.[/tab][/tabs]

According to FilmL.A., for every direct job on a production (including those of actors, grips, musicians, directors, producers, caterers, makeup artists and other crew members), 2.7 other jobs are supported by the strength of California’s entertainment industry. This means that more than half a million people currently living in the state depend on local film and television production to thrive.

Among the half-million workers heavily impacted by outsourcing are those in post-production. In California, once a hotbed of such activity, reports of forced closures of sound stages, recording studios and audio post-production facilities roll in at an alarming rate; the latest victim, Pacific Ocean Post in Santa Monica, announced its pending closure Monday. The American Federation of Musicians has taken up this hot-button issue with its recently launched Listen Up! campaign, which takes aim at companies such as Lionsgate that take millions in U.S. film and TV tax-credit dollars but habitually send post-production jobs overseas.

Production incentives for the film and television industry are proven to increase job creation, small-business and infrastructure development, and tourism, and generate significant tax revenue. According to the CFC, “In order to retain and grow California’s signature entertainment industry, the state must be competitive. Otherwise, productions will increasingly choose other states and countries.” Echoing this sentiment, a recent Milken Institute study concluded: “California should ensure enough incentives to balance out its higher costs and the increasing aggressiveness of other states.”

Maintaining California’s leadership role as the entertainment capital of the world is vital to the state’s economy. The motion picture and television industry currently sustains more than 190,000 direct jobs in California and annually pays out $17 billion in wages to state workers. As a major driver of the economy and huge source of employment and revenue, the film industry’s loss would be detrimental to the entire state.

Ensuring the passage of AB 1839 is crucial to California’s economic future. It’s clear from the Lockheed tax break that our leaders in Sacramento recognize the positive impact these incentives have on the state’s economy. Let’s hope they extend this same reasoning to preserving California’s entertainment industry before it’s too late.

(Gary Lasley is Secretary/Treasurer of the American Federation of Musicians, Local 47.)

---

Lockheed photo by Andy Wolfe. Video production photo by Patty Mooney.