Chasing the Reel Deal: How States Compete for Hollywood's Attention

When independent films like "Rosemead" seek out states offering lucrative tax incentives, they save money but face creative challenges in adapting their stories to unfamiliar settings. This delicate balance highlights the complex dance between the movie industry and the governments vying for their business.

Lights, Camera, Incentives: The High-Stakes Game of Luring Hollywood

The Lure of Tax Credits

Over the past two decades, states have collectively spent a staggering $25 billion on tax incentives to attract Hollywood productions. New York State, for instance, has handed out more than $7 billion in incentives, offering studios up to 40% of their production costs. Meanwhile, California has dedicated over $3 billion to try to retain its status as the entertainment capital. This fierce competition has created a complex ecosystem where the movie industry's needs and the states' economic interests collide.

The Promise of Job Creation

Supporters of these film incentives argue that they serve as an engine for job creation. When productions come to town, they require a vast array of skilled professionals, from electricians and hair stylists to caterers and transportation crews. The influx of these productions also generates spending that ripples through local economies, benefiting hotels, restaurants, and other businesses.

The Economist's Skepticism

However, economists have long been skeptical about the true value of these incentives. Study after study has found that the tax revenue generated by film incentive programs is a mere fraction of the investment, often as low as a quarter or even a dime for every dollar spent. In some cases, the cost to taxpayers for each direct job created can exceed $100,000.

The Incentive Ecosystem

The incentive programs come in various forms, from cash rebates and grants to transferable tax credits. The latter has created a unique dynamic, where studios can sell their tax credits to companies with high state-tax liabilities, effectively cashing out and providing those buyers with modest tax relief. This has led to the rise of an unexpected group of players in the incentive ecosystem, including the likes of Best Buy, U.S. Bank, and Dr Pepper.

The Challenges of Filming Elsewhere

The pursuit of tax incentives can present creative challenges for filmmakers, as exemplified by the production of "Rosemead." The film, set in the sunny suburbs of Southern California, had to be shot in the rainy streets of Queens, New York, to take advantage of the state's generous incentives. This required the crew to meticulously hide any signs of the East Coast, from yellow cabs to bare trees, to maintain the illusion of the intended setting.

The Elusive Accounting of Incentives

Tracking the flow of these incentive dollars is no easy task. Since the money never enters the state treasury, it becomes less obvious that revenue has been lost. This can make transferable tax credits politically palatable, even as economists question their true economic impact.In the end, the dance between Hollywood and state governments continues, with both sides seeking to maximize their gains. As the competition for the movie industry's attention intensifies, the creative and financial challenges faced by filmmakers like those behind "Rosemead" serve as a microcosm of the larger battle for the reel deal.