“I applaud President Trump for recognizing that we are losing a lot of films to foreign countries, and I hope he steps up,” Newsom said Wednesday.
The proposed state film tax credit expansion has united motion picture studios and entertainment industry workers, but it is the unions that have been leading the fight.
The groups backing the plan have poured at least $8.4 million into lawmakers’ coffers since 2015, including nearly $6.5 million from the California State Council of Laborers alone, according to an analysis of CalMatters’ Digital Democracy database. Walt Disney, a top supporter, has given nearly $750,000 to lawmakers since 2015.
Dozens of unionized workers have filled legislative hearing rooms and spilled into the hallways as they testify in support.
“We are the thousands of artisans whose names whip by in the credit roll at the end of the movie. Not those that appear in huge letters and fade slowly at the beginning of the movie. We don’t go to the award shows. We work the award shows,” said Renata Ray, representing a chapter of the International Alliance of Theatrical Stage Employees.
Nalder said that is a smart political move since labor unions hold so much political sway with Democratic lawmakers.
And the tax credit expansion “touches both the struggling workers as well as international mega-stars,” said Thad Kousser, a political science professor at University of California-San Diego.
Still, the funding could backfire on Newsom as he eyes a potential White House run in 2028.
“You’ve got to think about policies’ effect on your core supporters … but also the average voters in places like Iowa, New Hampshire, who may not see someone who’s helping bail out Hollywood as someone taking the nation in the direction they want to see,” Kousser said.
Do film tax credits work?
California’s film tax credit was created in response to other states’ incentives. As of last year, 37 states had similar incentives. California’s program is often compared to the unlimited tax credit in Georgia, a frequent destination for film production, and New York’s incentives, which were raised last week, from $700 million to $800 million a year.
But California’s program is unique: It is the only state to award credits based on the likelihood of a project creating jobs and boosting the economy. It is also one of the few states to prohibit using the tax credits to pay “above-the-line” crews, such as directors, actors or writers.
The nonpartisan Legislative Analyst’s Office said there is “good evidence that tax credits increase production activity” and it could increase the size of the state’s film industry.
That is partly because some studios choose to film elsewhere when they are denied tax incentives. Between 2011 and 2013, roughly two thirds of the applicants who did not receive tax credits in California shot out of state, according to a 2016 report by the legislative analyst. And between 2020 and 2023, almost 60% of applicants who were denied the tax credits produced out of state, according to a 2023 report by the California Film Commission, which administers the credits.
But would the tax credit boost the state’s broader economy? Research is mixed.
A study of California’s first film tax credit program, which used a lottery system to award credits, found major studios that received the incentives spent and hired more in California.
Supporters of the California proposal, such as Assembly Democratic Caucus Chair Rick Zbur, a Los Angeles lawmaker who introduced the legislation — argue that the program “pays for itself.” They frequently cite a 2023 analysis by the nonprofit Los Angeles Economic Development Corporation which concluded that for every dollar the state spent on the tax credits, state and local governments collected $1.07 in tax revenue. It also said each dollar invested led to $24.40 in economic activity and $8.60 in increased wages.
“Every show that shoots in California supports hundreds of jobs. It pumps money into local economies from lumber yards to restaurants, from car rentals to dry cleaners,” said Ed Lammi, a former Sony Pictures Television executive, in an opinion piece citing the research.
The study was prepared for the Motion Picture Association, one of the legislation’s top supporters. The association has given lawmakers $168,000 since 2015, Digital Democracy data shows.
But while some studies show some evidence that filmmakers are drawn to states with better incentives, the legislative analyst’s office and most researchers have concluded that states almost always lose money on such programs, and that the credits have little to no effect on a state’s economic growth or its job market.
Michael Thom, a professor at the University of Southern California, wrote to lawmakers in March that his research showed the programs generally failed to create jobs or increase wages. “Simply put, California cannot afford the existing incentive, much less a substantial expansion to it,” he said.
Mike Gatto, a Los Angeles Democrat who authored the first expansion of the film tax credit program in 2014, said he is skeptical about subsidizing the film industry without addressing the root causes of its problems.
“It is doubtful that the amount of money that the state gives to this industry proves to be something that we get back,” he said.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
