Dan Walters

Dan Walters: California uses tax breaks to subsidize favored industries

Dan Walters
Dan Walters

When Los Angeles Mayor Eric Garcetti visited the state Capitol recently, it wasn’t a social call, at least not entirely.

Garcetti, calling it “a civic emergency,” was there to press for renewal of a state tax credit for the Los Angeles-based film and television industry in hopes of slowing migration of production to other locales.

The Assembly has passed legislation that would extend and apparently expand the current $100 million per year credit that was originally approved in 2009 at the behest of then-Gov. Arnold Schwarzenegger, a one-time action movie star.

The legislation, Assembly Bill 1839 by Assemblyman Mike Gatto, D-Los Angeles, won Assembly approval by a 76-0 vote and cleared a Senate committee this week, even though its cost is still unknown.

“This effort is a rare example of government taking proactive steps to ensure well-paying jobs stay in our communities,” Gatto said.

It’s quite evident that film production in Southern California has declined sharply. Technology has made location shooting easier, cheaper and less dependent on sunny weather, and other states and nations, especially Canada, have lured away production with tax credits and other subsidies.

Louisiana has been particularly aggressive, which is why one sees so many films and television shows, including so-called reality shows, set in that state.

But are tax credit subsidies – diverting public funds that otherwise would be available for other purposes – likely to stem the exodus of production?

They haven’t so far, and the Legislature’s budget analyst has warned that “responding to other jurisdictions’ subsidies could be very expensive and for state government, the film tax credit does not pay for itself” in higher revenue.

The credits smack of crony capitalism. Why should rich film producers feed at the public trough while, for instance, payments to doctors serving the poor are being whacked?

There’s also an element of hypocrisy. The state’s Democratic politicians have uniformly rejected criticism that the state’s high taxes and dense regulatory thicket discourage job-creating investment. But if that’s true, why then do they then offer subsidies to certain favored industries to keep them from fleeing?

Our politicians are working furiously on “incentives” to persuade electric car tycoon Elon Musk to locate a battery factory in the state. A Musk-owned solar energy company is a major beneficiary of a tax break hastily placed in the state budget.

Another new bill would give a big tax break to a potential Lockheed Martin fighter plane plant in Southern California.

Rather than handing our money to particular industries or companies, wouldn’t it be fairer – and more seemly – to make California more attractive to all would-be job creators and avoid the shadowy politics of targeted subsidies?