Hollywood protectionism

NewsMax has a story on the latest in protectionist scheming:
According to industry estimates, the U.S. economy loses between $10 billion and $15 billion annually as a result of films, television shows and commercials shot in foreign locations. Now Hollywood is looking to Gov.-elect Arnold Schwarzenegger to do something about it, according to an NBC report.
Okay, so filming overseas is a $10-15 billion industry. So, what are the industry estimates on domestic filming? Are domestic revenues going up, down, or remaining the same while foreign revenues rise? Industry mouthpieces aren’t saying.


The Terminator’s star power could help motivate Congress to pass some key stalled legislation in Washington. In a recent meeting with Sen. Barbara Boxer, D-Calif., Schwarzenegger offered his help in lobbying Congress on behalf of the industry.
That is, on behalf of the segment of the industry that doesn’t do any filming overseas – and on behalf of the domestic unions, no doubt.
Included in the Hollywood wish list is a bill now in a congressional conference committee that could provide about $250 million over five years in incentives for keeping small- and medium-budget productions in the United States.
Under an amendment, films would qualify for a tax deduction if half of the wages paid to actors, producers, directors and others are kept inside the United States.
Affirmative action taxation for the entertainment industry.
According to a recent report, the U.S. economy has lost about $4 billion in economic benefits about 25,000 jobs per year since Canada began offering tax subsidies in 1998 to film production companies.
Entrepreneurs naturally flock to places where the cost of doing business is less. (But there’s much more to it than that – after all, business still exist in the State of California.) Reducing the cost of doing business can be accomplished honestly – by placing a low tax burden on everybody – or dishonestly. Canada follows the latter path with its own rob-Peter-to-pay-Paul-and-a-bunch-of-government-intermediaries tax policy, effectively forcing one set of industries to subsidize another.
Schwarzenegger adviser Bonnie Reiss, a former entertainment attorney, has been charged with trying to stem that tide when the governor-elect is sworn in a week from Monday. Reiss is a Democrat.
Protectionism may have bipartisan support, but Dems are better at the class warfare (or nation warfare, in this case) rhetoroic necessary to promote such policy.
“I think [Schwarzenegger] can have impact on the Senate floor,” one Hollywood lobbyist told the Daily News. “He’s got a bully pulpit, he’s larger than life and he really understands the industry.”
If Hollywood protectionists understood their own industry from an economic perspective, they’d try to come up with more ways to bring down the cost of filming in the US. Like overall reform of tax and regulatory policy that affects the studios. Like the proliferation of non-union production companies. Like a more aggressive campaign to bring unknowns to TV and cinema. Any other ideas?

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2 comments

  1. Dave in LA

    Filming in California is expensive for a host of reasons. As you say, relief can be granted honestly or dishonestly. Arnold could use the film industry as a working example of how the State could (the honest way) make it easier for lots of industries to do business here.
    Here are some ideas that would help film and TV, and also other businesses:
    – eliminate the business-to-business sales tax. There are some breaks for the industry, but the whole idea of sales tax on intermediate goods is insane.
    – allow for the accelerated depreciation of capital investment items– cameras, computers, etc. Make the categories broad enough so that lots of companies can benefit.
    – bring some sanity to our workers’ compensation system. Rates are among the highest in the country, but benefits are among the lowest — doctors and lawyers eat up most of the pie.
    There are others, but this would be a start.