California’s film industry faces tough challenges, and expanding the Hollywood tax credit could provide much-needed relief. As competition intensifies from other states and countries, industry insiders emphasize the urgent need for stronger tax incentives. California’s global production market share continues to decline, and revitalizing its tax credit offerings may prevent further losses.
The Decline of California’s Film Production
On-location filming in Los Angeles has significantly decreased over the past year. FilmLA, the organization managing film permits and tracking production, reported a 20% decline in filming activity. California’s global production share fell from 22% in 2022 to 18% in 2023. This drop highlights a troubling trend: California is losing its hold on the entertainment industry. Popular destinations like Georgia, New York, and international locations are attracting more productions, reducing California’s dominance.
LA Times | MSN | FilmLA recommends expanding California's film and TV tax incentive program to revive the industry.
California’s Competitive Disadvantage
California currently offers a $330 million tax credit program to entice film and TV projects. However, other states and countries provide much larger incentives. Georgia and New York offer significantly higher tax credit packages, while countries like the UK and Canada also provide substantial incentives. California’s limited tax credit no longer meets the needs of big-budget projects, which are now relocating elsewhere.
Paul Audley, President of FilmLA, stresses the importance of a competitive approach. He notes that California, once the film and TV production leader, is now just one option among many. Without an expanded tax credit program, California risks losing even more productions and the associated economic benefits.
Proposed Improvements to the Hollywood Tax Credit Program
The California Film Commission has proposed several changes to improve the tax incentive system. One idea is to expand the program to include commercial production, a growing segment of the industry. There’s also discussion about covering above-the-line salaries, including those of actors and directors, which could attract star-driven projects.
Colleen Bell, executive director of the California Film Commission, recently highlighted California’s challenges. While California may not compete dollar-for-dollar with other locations, she acknowledged that Hollywood offers unique advantages. California’s industry infrastructure, experienced workforce, and proximity to top talent make it an attractive location for productions. However, these benefits alone may not sustain the state’s film industry without improved incentives.
Kaitlyn Huamani | MSN | California's infrastructure, skilled workforce, and proximity to top talent make it a prime location for productions.
The Economic Impact of Film Production on California
The entertainment industry contributes around $43 billion in wages to California’s economy each year. Film and TV projects generate revenue for local businesses, including catering services and construction companies. As productions shift to other states, California loses direct spending, jobs, and tax revenue associated with these projects.
Paul Audley has warned that California’s reliance on a shrinking portion of the production market is unsustainable. Other states continue to expand their incentive programs, which may lead to more production losses for California. A decreased local film industry would mean less economic activity and fewer job opportunities, impacting numerous businesses and workers.
The Broader Cultural Implications
The entertainment industry is a critical part of California’s cultural identity. Hollywood, synonymous with global film production, draws talent worldwide. However, as productions move to other states, California risks losing this cultural heritage. Expanding the Hollywood tax credit program would reinforce the state’s commitment to its film industry and help preserve Hollywood’s legacy as the world’s entertainment capital.
Expanding California’s tax credit program could help to revitalize the state’s film industry. Enhanced incentives may attract more projects and encourage them to stay in California. Adapting its approach would benefit the state financially and help protect Hollywood’s cultural significance. By investing in an expanded tax credit, California can reinforce its position as a global film and television production leader.
