Los Angeles - California is not exactly a business-friendly environment these days. The state offers companies some of the highest tax rates in the U.S. to go along with incredibly obstructive regulations that add to the cost of doing business.
It’s certainly not the kind of economic climate change over-budget movie studios can believe in.High taxes and regulation have hit Hollywood where it hurts, right in its collective blockbuster wallet. The California Film Commission (CFC) released a report yesterday stating that from 2010 to 2014, runaway film projects amounted to $2 billion of out-of-state production spending.A $2 billion loss represents more than a few blockbuster movies that were produced somewhere other than Hollywood, California. Instead, the money was pumped into local economies in business-friendly states, many in the Southeast and in overseas settings.
America once invented and produced television sets in mass. Today, America is a foreign consumer market for other countries that produce our televisions and accessory products. Likewise, it’s looking more like Hollywood movie production will also be gone with the wind at some point.Increasingly, film and television projects are going the way of other corporate giants, transplanting studio pods to other states and countries, adapting to their new locations like body snatchers coming to life in more tax-friendly environments.The scope of the problem for Hollywood is tremendous. Just last year 42 projects that applied for California's tax credit spent more than $1 billion outside the state compared to 26 projects that remained in the state adding $211 million to California’s economy, according to the CFC report.The study did not include projects that don’t even qualify under the restrictions implemented by state government. California's tax credit program is unavailable for projects costing over $75 million, as well as new “network dramas.”While the state Assembly has approved a bill, AB 1839, that would expand the program, it is unclear if the legislation is too little, too late. Major corporations outside of the movie business are also exiting California in droves, like Toyota Corporation, which moved its headquarters to Texas to avoid higher California taxes. Hollywood movie production is part of the exodus.While movie productions continue to relocate out-of-state, California's tax credit program has had minimal impact thus far. About $700 million in tax credits were issued since 2009 to eligible film and TV projects that in turn spent about $5.39 billion in the state. Over $1.7 billion of that money went to paying wages for crew members, according to the report.However, if California continues to hemorrhage $1 billion per year in movie and television projects, Hollywood may curiously enough become the Benjamine Button of the movie business.