As you all know, I am a producer of feature films, well mostly TV movies. Thus far, most of my films have shot overseas in order to keep costs down. A number of them could have and would have been shot in America had there been any kind of tax incentives to level the playing field with the cheaper labor rates found in Thailand, India and Eastern Europe.
In the past few years, many states have enacted such tax incentives. The three most lucrative and most popular are currently Michigan, Louisiana and Georgia. I have already written about the Michigan tax incentives in the past. One such article about Michigan is “SAG and the Independent.” These tax incentives are keeping billions of dollars and hundreds of jobs in the United States at a time when they are needed most. As of this morning, the unemployment rate is 9.0% and the “Real” unemployment rate is approximately 16%.
Recently, California has enacted a Tax Incentive Statute, to help keep its lucrative entertainment industry alive. The California Statute provides a refund of up to 25% of Qualified Production Costs for Films that have 75% of their production days and/or 75% of their total budget spent in California. The total amount allocated for this credit is one hundred million dollars per year. However, the total amount has a lifetime cap and such cap is quickly approaching.
Effectively, this California money will run out in about 18 months. What this will do is remove all production from the state of California except for some TV, and a few feature films in which the stars have enough clout to keep the film in California. As it is now, production in California is down even with the credit because, other than NY, it is the most expensive state to shoot in. Without the credit, the industry will effectively leave the state. Once it’s gone, it will be very difficult to ever get it back.
Who will be hurt the most by this? Will it be the major studios or independent producers? No. Studios will shoot films wherever they can make them cheaper. Producers will do the same. It may be inconvenient or uncomfortable for producers like me to live in a foreign country or in a hotel for a few months, but such is the cost of business.
The State of California will be hurt largely because the lucrative tax revenues from the Entertainment Industry will go elsewhere. However, the people who will be affected the most are the laborers who actually make the movies. I’m talking about the grips, gaffers, drivers, prop makers and the general labor on a movie set. These are the people who are not taken when a film leaves the state of California. These are the people who will become unemployed and/or leave the state for areas where employment in their field may actually exist. This, of course, will then hurt California even more as more tax revenues disappear forever.
The two major unions that represent these craft workers and laborers are the IATSE and the Teamsters. IATSE represents almost all non-creative labor on a movie set. The Teamsters represent casting directors, drivers, location managers and animal wranglers. Therefore, it is in the best interests of these two unions to do everything possible to keep production here in California. And, I have been informed by inside sources within the government that they are. In conjunction with the DGA which represents directors, these unions have been lobbying to get the California Production Tax Credit increased and extended to help maintain whatever employment there is left in California for production crews.
From what I have been told, the legislators in Sacramento are taking the lobbying efforts of these unions seriously because they are “workers” and represent the middle class. In contrast, when Warner Bros or Disney goes up to Sacramento, they are seen as the rich downstate Hollywood Producers begging for taxpayer handouts to keep their expensive cars and Beverly Hills mansions. To put it frankly, lobbying by the Hollywood Studios doesn’t work. But, it may work for the IATSE and Teamsters members.
So, why hasn’t Sacramento extended the tax credits? As we all know, the State of California is effectively bankrupt. The California Legislature is having a tough time deciding where to allocate the few dollars that are available. And, there are many other industries and lobbyists that have their eyes on the few available funds.
What surprised me most, as told by my contact, is that there are other unions actually trying to kill the production tax incentives and actively lobbying against their continuance. Which unions might you ask: The SEIU and the CTA (California Teachers Association). These two unions who have their hands in almost every pocket within the State do not care about their fellow laborers in the Entertainment Industry. They only care about getting an ever increasing share of California Tax Dollars; to the extent that such tax dollars even exist.
As you know, the SEIU represents many state and local government employees. They also represent people in other industries such as hospital workers. However, their strength comes from their representation within the public sector. Basically, the more money they can get from the government, the more the union members get paid and the more dues money goes to the union. The same is also true of the CTA.
Accordingly, both the SEIU and the CTA are doing everything in their power to stop the re-funding of the California Production Tax Credit. To put it simply, they want the money! To hell with the Entertainment Industry: Even if it is one of the top private employers in the state! This is all about government to these people and, not only the payment of public employees, but its expansion as well. Maybe we should look at what’s going on in Wisconsin right now where they are currently considering a statute to invalidate union representation in the public sector.
Over the course of the years, I have had many arguments with the IATSE and at one point was on their “Most Wanted” list. Not this time however. California has got to wake up in so many ways and this is one of them. Keep your biggest industry here where it started and where it belongs.