This is a sequel we don’t need.
Following calls by Gov. Gavin Newsom to double state tax credits going Hollywood TV and movie productions, the California Legislature is working on two bills that would subsidize the industry at everybody else’s expense.
Currently, California provides tax credits of 20% or 25% for qualified projects made in this state. According to the California Film Commission, credit allocations so far in 2025 include $20.8 million for an untitled movie by Daniel Kwan and Daniel Scheinert, $12.2 million for the “Paradise 2” TV series and $7.4 million for the movie “Behemoth!”
Assembly Bill 1138 is by Assemblymember Rick Chavez Zbur, D-Los Angeles. The number derives from George Lucas’ 1971 movie “THX 1138.” The bill would increase the tax credit to 35% or 40% for qualified projects, and expand qualifications to include animated films and series and “large-scale competition shows.”
The bill is “an economic driver for the state, and also continues to amplify the cultural creativity and the storytelling that California does unlike any place in the world,” said co-sponsor Assemblymember Isaac Bryan, D-Los Angeles. The credits also are intended to counter the similar credits given by other states to lure away film production.
On April 28 the bill passed the Assembly Revenue and Taxation committee, 6-1, with only Carl DeMaio, R-San Diego, opposing.
Senate Bill 630 is by state Sen. Ben Allen, D-Santa Monica. It would make similar changes, while increasing the total tax credit allocation from $330 million a year to $750 million. On April 23, it passed the Senate Revenue and Taxation Committee unanimously.
The problem with these tax-credit sequels is the rest of us will pay for them with higher taxes. The money for the state general fund, currently projected at $229 billion for fiscal year 2025-26, doesn’t come free. With President Trump cutting federal funding, money is tight.
“Film credits are not enacted to help the state economy,” explains Raymond Sfeir, the director of the A. Gary Anderson Center for Economic Research at Chapman University. “They are meant to help a particular industry, in this case one that is concentrated in Hollywood.” He said the jobs saved are only a small percentage of those in the state.
Sfeir also blamed union power and state labor laws for boosting production costs, especially compared to such low-tax states as Texas and Florida. It’s another case of unions gaming the state government to help themselves at the expense of the rest of us.
Previewing Chapman’s June economic forecast, he warned, “The Trump tariff debacle is going to hit the U.S. and California economies. So tax revenues in California are going to be meager.”
If Hollywood wants to help itself, it should help everybody in the state by using its economic and political clout in Sacramento to bush general cuts in spending, taxes and regulations. Neither these state-based proposals nor President Donald Trump’s bizarre call for taxing foreign films are right. As to AB 1138 and SB 630, they should be checked into the Bates Motel.
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