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Hollywood's Latest Garbage: Our Tax Dollars at Work

The next time you see an ad for a movie that looks terrible, just know: your tax dollars paid for that.

Photo by Kenneth Lu

You see the trailer on the TV and think: That just looks awful. It looks bad, like what would happen if a dog ate a script and someone filmed what came out the other end. Maybe it’s another derivative book for teens that’s been turned into another derivative film for lonely adults. Maybe someone decided to reboot Spiderman for a third time. Whatever garbage Hollywood is selling in between the filth you’re watching, you sure as hell ain’t buying. At least, you think, they won’t be getting my money.


The joke’s on you, Ebert, because while you may believe you’re too damn good for the latest Vince Vaughn and Owen Wilson bromance, chances are your elected leaders don't agree. Odds are they’ve already handed over your hard-earned money to the producers of that dogshit in the name of creating jobs for rich actors. As the Los Angeles Times reported last December, states across America hand out no less than $1.5 billion in tax credits to the entertainment industry each year, up from just $2 million at the beginning of this sorry century.

This money goes toward garbage that is, at best, mindless—toxic trash that, at its worst, teaches children that women are sex objects who should only speak when spoken to by a macho military man rescuing her from a dark-skinned terrorist. In California, for example, last year's tax credits went to projects such as The Purge: Anarchy ($2.2 million) and an effort to turn the iconic 90s show Baywatch into a feature film ($8.4 million). The producers of Entourage got $5.4 million to make the jump from HBO to the silver screen.

The curious thing about all these handouts is that they come in an age of alleged austerity, when states are said to be so short on cash that they have no choice but to cut whatever meager programs are left for America’s 50 million poor. In 2011, California lawmakers took a machete to the state budget. “The steepest cuts,” the New York Times reported at the time, “affect the most vulnerable.” The state’s health insurance program was cut by $1.8 billion, welfare was slashed by $1.5 billion, and services for the developmentally disabled were cut by $750 million.


Tax revenues have rebounded since then, but most social assistance programs were never fully restored to their pre-austerity budgets, as Democratic Governor Jerry Brown preferred instead to embrace a Republican plan to pay down the debt. “We’ve done a lot already,” the governor explained, “and we haven’t paid for what we’ve already done.”

Earlier this month, California Assemblyman Mike Gatto decided to speak out.

“I’ve heard from so many people over the past year who have told me about their family being torn apart,” he said. But he wasn’t talking about welfare for the poor and how families are struggling to pay the bills in the wake of drastic budget cuts. He was advocating more welfare for the rich by ramping up the tax credits to Hollywood from the current $100 million a year to $400 million. On August 14, his bill proposing to do just that sailed through committee on a 5-0 vote and all but certain to become law, though a compromise announced by Governor Jerry Brown reduced the total amount of the handouts to $330 million.

The justification is “jobs.” By giving tax breaks to the entertainment industry, the thinking goes, productions won’t leave the state of California for more lucrative tax breaks elsewhere. Hollywood plays America’s 50 states like the garment industry plays the developing world, threatening to leave if they don’t get special treatment and public money.

According to California's own Legislative Analyst’s Office (LAO), which reviewed the bill from Assemblyman Gatto, “There does not appear to be sufficient data to support the assumed benefits.” Indeed, a “critical downside” of these tax credits is that there’s no way to prove those who receive them wouldn’t have filmed in California anyway. As it is now, the LAO found that California earns back only about 65 cents for every tax credit dollar. Supporters are quick to point out that the analysis did not quantify the all the potential benefits, such as increased consumer spending from employees in the entertainment industry who would still have jobs.


Still, that money—that lost revenue—could go toward other priorities. It could go toward “social assistance programs,” the LAO notes, or even be “returned to taxpayers.” Whatever one decided to do with the money, it would “trickle through and impact the broader economy.” Hollywood is the beneficiary of these tax credits, in other words, but that's not because it's necessarily best positioned to stimulate spending. The problem is that neither the poor nor middle class taxpayers are as politically influential as the producers of Boy Scouts vs. Zombies, who saw their tax burden slashed by $3 million.

Like documentaries, erotic films are not eligible for tax credits. Photo via Flickr user galant

What about the cultural aspect of it all? Have I just cherry-picked the most artistically offensive recipients of these tax credits in order to bolster my position that they are bad? Yes, I absolutely did, but it should be noted that the $100 million California currently doles out is in fact distributed by lottery. Human beings did not get together and decide the TNT legal drama Franklin & Bash should get $4 million in tax credits. Lawmakers are proposing to change that, however, so maybe in the future more deserving projects will receive that sweet, sweet government largesse.

Or maybe not. Lawmakers may do away with the lottery system and instead leave it up to the California Film Commission—composed of 21 members drawn from the film industry, private sector, and state and local governments—to award tax credits to the projects believed most likely to create the greatest number of jobs. As it is now, films with production budgets greater than $75 million are ineligible for these credits; officials want to drop that rule, too, so the people making big-budget blockbusters—the productions least in need of a helping hand-out—are eligible to reduce their tax burdens.


Speaking to VICE, Assemblyman Gatto—whose LA district includes a number of film and TV studios—defended his legislation. He’d actually like the keep the current lottery system, a change he noted was imposed by the state Senate. “We’ve always intended on opening the system up to the really big productions—Transformers 25 or whatever it is—that employ 1,000 people at a time," he said, before adding, “We’ve always been mindful that they couldn’t eat up the entire credit.” (The bill sets aside $20 million for independent productions, according to the LAO.)

Gatto also noted that the program ultimately won’t cost the state $400 million as it will recoup much of that money in the form of increased tax revenue from industry employees—mostly white and certainly better off than the average Californian—spending money they otherwise might not have. Why Hollywood, though? “In my district, they estimate one out of five people works in the entertainment industry in some fashion,” Gatto told me. And those people are complaining that their jobs are headed out of state.

“Nobody runs for office, Democrat or Republican, and says, ‘I want to run so that I can prop up a struggling industry,'” Gatto said. "I came to this position rather reluctantly after seeing that a lot of other states have engaged in some rather anti-competitive practices to lure our jobs away.”

He’s not wrong. The $330 million California will be handing out is still be surpassed by New York’s $420 million welfare-for-the-wealthy program. “This is California’s response,” Gatto continued, suggesting that he’d actually prefer it if the federal government stepped in to prevent states from devoting so much money not to “creating” jobs, but merely to shifting production around within the United States. In the meantime, though, Gatto maintained he can’t stand idly by while jobs leave his district.


When I asked if the resources spent on tax credits couldn’t be better spent on other things—like childcare for poor mothers—Gatto argued, “You could say that about anything” the legislature spends money on, which is of course true. And to be fair, spending money on the entertainment industry isn’t nearly as bad as propping up private prisons.

Big-budget films like 'The Hangover: Part III' ($104 billion) are now eligible for tax credits. Photo via Greg's Southern Ontario

Still, others I spoke to said it doesn't matter if spending money on Hollywood isn't the worst use of money—it's still not a good idea.

Dean Baker, an economist and co-founder of the Center for Economic and Policy Research, thinks this is all stupid. Not only will the state be favoring more big film studios at the expense of smaller indie projects, under this latest proposal, but that change doesn’t even make sense economically.

“When you have big name producers, directors, and actors who can command high pay," Baker told me, "you will employ fewer people per dollar of subsidy." The rich, in other words, could very well become richer as a result of these tax credits. And while they will spend that money and in turn stimulate the economy, there are better ways to aid average Californians—and struggling artists—than having them wait around for that money to trickle down.

Baker has a crazy idea. Suppose, hypothetically, that lawmakers were genuinely interested in promoting the arts, not just subsidizing politically influential industries. One way they could promote “culture”—without depending on a board of 21 government-approved people to decide what exactly that is—while also stimulating economic activity is by giving every Californian a refundable tax credit that they could in turn give to any artist of their choosing. If you like an artist’s work, you could give them $100, for example, and at the end of the year reduce your tax burden by that amount; if your tax bill was zero dollars, then the state would give you $100. And the work would be in the public domain, saving consumers millions of dollars that’s currently wasted paying artificially inflated costs for state-subsidized, copyrighted works—money that flows into the pockets of entertainment industry executives, not starving artists.


“My guess is that you would have a ton of creative people coming to California to try to get a chunk of this money,” said Baker, “and while they are there they would look to do things like live performances of music, plays, book readings, writers' workshops, etc., which would both subsidize their income and make them more widely known so that they could get more money from the public.” That would stimulate the economy while also ensuring that money went to the most deserving, not the producers of Transformers 7.

Jeff Brewer is a public policy specialist at the Center for Community Change, a non-profit that advocates on behalf of low-income Californians. He told me that if lawmakers want to get more money in the hands of their needy constituents, rather than their greedy campaign contributors, “giving away money to an industry that is reaping record profits year after year isn’t the way to do it.”

Assuming for a moment that they want to help, Brewer said California’s elected officials could put the $400 million in proposed Hollywood tax credits toward restoring cuts they made years before. The state’s subsidized childcare and preschool program, for one, was cut by 110,000 slots during the officially designated recession. Just 11,500 of those positions have been restored, forcing many low-income parents to forgo full-time work in favor of the full-time job that is watching their kids. The Supplemental Security Income/State Supplementary Payment program (SSI/SSP) for disabled and impoverished seniors hasn’t seen a cost of living adjustment in five years, which means the most vulnerable Californians are receiving $30 less per month than the paltry amount they were getting before the economy crashed.

In short, there are plenty of things the state of California could do if it wanted to get more cash in the hands of Californians that are more efficient—and, dare I say, morally justified—than handing out tax breaks to Hollywood so some studio exec can move into a bigger house and stimulate the economy by hiring a half-dozen maids.

Actually, it’s the perfect topic for a film: an investigation into why, amid record-breaking poverty, subsidizing the plenty-rich is seen as the best way to get people back to work. Unfortunately, documentaries aren’t eligible for tax breaks. You can, however, ease your depression over the state of affairs with some mindless entertainment at your local cinema. And why not? You’re already paying for it.

Follow Charles Davis on Twitter.