Hollywood's Tax Cut Hypocrisy

Folks in Hollywood like to portray themselves as champions of the people. They proclaim support for socialists like Michael Moore; they decry the growing gap between rich and poor.

Then they ask for tax breaks and pay raises.

States across the nation are attempting to attract television and movie filming with tax breaks for Hollywood. Ohio Governor Ted Strickland (D) has offered a $10 million tax incentive for filming. In Indiana, lawmakers overrode a governor’s veto of film industry incentives. Back in 2004, Maryland and Pennsylvania waged an ongoing tax break race in an attempt to woo filming of Annapolis, starring James Franco. Wisconsin and New Mexico have both given cash to the film industry. Texas is now considering rebates for filming in the state – as much as 15% to 20% of cost will be handed back to filmmakers. The cost: $60 million. Michigan offers 42% back to producers and studios in the form of tax rebates. Last year, those tax breaks cost the state $48 million.

The Golden State is trying to keep Hollywood in Hollywood with its own set of massive tax breaks. While California is raising taxes on its citizens, it’s lowering taxes on Hollywood production companies – its state budget included a $500 million tax credit for Hollywood filmmakers. And Los Angeles is now looking to hire a full-time film czar dedicated to keeping filmmakers in the city – and dedicated to lobbying Sacramento for more cash for Hollywood.

The federal government has also gotten into the act. In the October 3, 2008 spending bill passed by a Democratic Congress and signed into law by President Bush, Hollywood received a $470 million tax break. President Obama’s stimulus bill had a $246 million tax break for Hollywood in the first draft; Republicans removed it.

Originally, such tax breaks were designed to keep Hollywood producers from taking their filmmaking elsewhere. These great patriots – the same folks who deride American corporations for taking their business overseas – have run to places like Vancouver, Romania, and France in order to film their projects. America’s share of the film industry declined rapidly over the first half of the decade. Since then, American filmmakers have returned, largely because Canada has refused to lower its current federal tax credit (16%).

But the competition for Hollywood dollars doesn’t stop — now the states are competing with each other for the privilege of filming the next Keanu Reeves vehicle.

Where’s Hollywood’s principled stand against the growing gap between rich and poor? Where’s the righteous indignation at tax cuts for the rich? After all, Hollywood is one of the few industries growing during this recession. In February, the movie industry was up 14% over 2008 levels and up 23% over 2007 levels. So why isn’t Hollywood giving us breaks? Why isn’t Hollywood bringing down ticket prices? Why isn’t Hollywood refusing the tax breaks and stepping up to be “patriotic,” as Joe Biden suggested? Where’s their sense of decency? Where’s their “Yes We Can” spirit?

What’s good for the American people – higher taxes — apparently isn’t what’s good for Hollywood. George Lucas was one of Obama’s biggest financial supporters: he personally donated $50,000 to Obama’s inauguration fund, as well as $4,600 to Obama’s presidential campaign and another $28,500 to the Democratic National Committee. Now Lucas is complaining that Obama’s plan to tax people making more than $250,000 would not help the economy. He also opposes Obama’s plan to cap executive salaries, saying that was something stockholders, not government, should pursue. He adds that such executive salaries certainly shouldn’t be capped in Hollywood. What was the difference between Hollywood and other industries? “Hollywood isn’t asking for a bailout,” explains Lucas. “So, you know, they are not using taxpayer money, and obviously the cornerstone of American capitalism is that you can make as much money as you want when you work for a company.”

Of course, this is utterly false. Hollywood is using tons of taxpayer money – or, at least, they’re receiving special accommodations. Lucas knows that. But where Lucas and his allies come from, it’s the rhetoric, not the reality, that counts.