Gavin Newsom is clearly auditioning for a bigger stage. But if the California governor is really going to run for president, he’d better hope voters don’t see his blooper reel. There are many bad policy takes, but one of the worst is Newsom’s expansion of Hollywood subsidies. The whole episode is guaranteed to fall flat with a national audience.
Last year, the governor enacted the biggest expansion in Hollywood subsidies in California history. With the stroke of his pen, he doubled the amount of incentives that movie and television producers can claim by shooting in California. Before, filmmakers could claim up to $330 million in annual incentives to lower or eliminate their tax bill. Now, the state will let production companies claim up to $750 million a year. Basically, California taxpayers foot the bill for almost every movie or show made in the state.
But these subsidies aren’t some feel-good storyline. They’re more of a horror show once you dig into the details. We did just that in a new report for the Mackinac Center for Public Policy, and our review of decades of evidence should leave Californians demanding a refund.
Our report shows that film incentives are little more than a redistribution of wealth from everyday taxpayers to well-connected filmmakers. They’re sold to the public as a means of supporting good-paying jobs. As Gov. Newsom said last year when announcing the latest round of subsidy recipients, they’re about “revitalizing the job opportunities, business growth, and economic prosperity for families.”
Taxpayers may want to laugh—or boo—in response. Academics and state analysts alike have looked at the impact of film incentives in California and across the country. As our report shows, they have routinely found that the subsidies create few permanent jobs, and often none. Nor do they grow the economy more broadly. In other words, California is throwing the people’s money down the drain.
University of Southern California Professor Michael Thom has been watching the slow-motion crash scene for decades. He analyzed state data after the initial creation of California’s film incentives. Between 1991 and 2016, the subsidies had little to no impact on film employment. Instead, the number of jobs ebbed and flowed with the broader labor market.
Yet Gov. Newsom has now doubled down on this record of failure. There’s little chance a more than 100% increase in taxpayer support will somehow flip the script.
California’s governor isn’t the only presidential hopeful who thinks a national audience won’t notice. Over in Illinois last year, J.B. Pritzker increased its film incentive to 35% of a production’s expenses. Pennsylvania’s Josh Shapiro has also touted his state’s taxpayer giveaways, recently claiming that a $34 million tax credit for two streaming shows “supports Pennsylvania’s creative economy.” In fact, experts estimated that Pennsylvania has a negative 86% return on its investment with film incentives.
Red-state governors have also gotten in on the act, especially Georgia and Texas, although their leaders don’t seem to have presidential dreams.
Yet while states like California keep this horror show going, some states have been smart enough to yell “cut.” My home state of Michigan once had what a previous Democrat governor called “the most aggressive” film incentive program “in the nation.” Eight years later, in 2015, a Republican governor and bipartisan majorities in the legislature repealed it, having spent $500 million subsidizing Hollywood. One state report found that two taxpayer-funded films had created zero permanent jobs.There’s simply no real-world, independent, evidence that subsidizing Hollywood benefits anyone. The only sources that claim otherwise are bought and paid for by Hollywood itself, like studies funded by the Motion Picture Association. State film offices also purport to find evidence of job creation and economic growth. But that’s what you’d expect from the bureaucracies that oversee these giveaway programs. They have to justify their abuse of taxpayer money.
If Gov. Newsom is pressed on film incentives, you can bet he’ll trot out claims of job growth and economic impact. But that’s exactly the kind of fiction you see on the silver screen. As he gears up for a likely presidential run, he might want to prepare for the chance that a national audience of taxpayers won’t like what they see.
Michael D. LaFaive is senior director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy.
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