We talk a lot on our channels about the tax credits and incentives that movie companies are offered by U.S. State governments and by foreign governments such as Canada and the U.K. These were designed to encourage film companies to bring jobs, business consumption, and thus commerce to the areas where they were put in—a case of government subsidizing business investment with the goal of increasing economic positivity and, of course, getting a touch of Hollywood glamor and attention in the process.
(L-R): Iman Vellani as Ms. Marvel/Kamala Khan, Brie Larson as Captain Marvel/Carol Danvers, and Teyonah Parris as Captain Monica Rambeau in Marvel Studios’ THE MARVELS. Photo by Laura Radford. © 2023 MARVEL.
Indeed, when such programs began, notably in Canada, a huge portion of production that would have otherwise stayed in the Hollywood area became known in the business as “runaway production” as these shows “ran away” to other places, and a whole lot of attention was given to this “problem” by various movie companies, unions, and organizations who felt the pain as their workers and soundstages were idled by it.
There was and is another factor you may not be aware of—the issue of “distant location” rates and conditions for union and Guild workers in showbiz.
Cassandra Webb/Madame Web (Dakota Johnson) in Columbia Pictures MADAME WEB.
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You see, if you live in the greater L.A. area and get a job on a movie, whether at a studio facility itself or on a location within a certain distance from the heart of Hollywood (known in the business as “The Zone”) you drive there yourself, show up, get paid your usual minimum rate per the contract, and get home again, and while for convenience’s sake to keep you close to work the company may cater lunch or dinner and there are rules for how often and how long breaks and meals must be, the expense of your employment and transportation is relatively small.
However, “Distant Location” rates include having the company pay for your travel, your housing at a hotel, a “per diem” to cover food and incidentals off the set and on weekends, and a rate of pay and perks substantially higher than the “in town” prices that must be paid. But that is only if you are indeed working “on location” and there are constantly abuses where a production company may say “Hey, we can’t afford you on Distant Location rates, but if you just ‘show up’ with a local address you’ve got the job as a local hire.”
It gets even more complicated when the union in question has members who DO live in the location city who then claim they are being cheated out of eligibility for the job by their own unions and producers and can make legal trouble under various regulations. In short, it is a system rife with potential for abuse and a big headache for everyone involved.
Timothée Chalamet as Paul Atreides in Dune: Part Two (2024), Warner Bros. Pictures
HOWEVER, a new level of calculation came in with the subsidies, especially when they were officially justified to taxpayers in various states as creating work and business for local citizens and service companies (hotels, car rentals, and in states and Canadian provinces with big subsidy activity, the creation of local movie equipment rental businesses, etc. etc.) The question was…how many of these were actually locals, and how many temporary transplants from Hollywood or New York who rented a short-term apartment to show up as a “local” but actually paid their taxes and consumed govt. services back home before and after the production left the location town?
Well, these subsidies and the various laws which enact and maintain them all have expiration dates and need renewing, and when they do, more savvy politicians actually are doing the math…and it is uniformly NOT a good deal for the states in question.
Margot Robbie as Stereotypical Barbie in Barbie (2023), Warner Bros. Pictures
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For example, the state of New York found that their Film Production Credit, which was recently expanded to $700 million a year, was a net negative for the state, providing only 31 cents to the state for ever dollar it gave away in tax breaks.
Michigan had a program from 2008 to 2015 that lost half a billion dollars net-net, but they are trying to revive it claiming they must to stay “competitive” with other states (now 40 of our 50 have these incentives, including California itself. A recent article in The American Spectator by Elyse Apel tells the story in stark detail:
In 2008, Michigan decided to give film subsidies a shot. ‘Get ready, the movies are coming to Michigan,’ said former Michigan Gov. Jennifer Granholm at the time. But, the governor was wrong. While the program did bring some movies to the state to film, including Transformers: Age of Extinction and Batman v. Superman: Dawn of Justice, the state lost money on the subsidies.
A Michigan Senate Fiscal Agency report found that Michigan spent $37.5 and $100 million on tax credits in 2009 and 2010, while only generating $21.1 and $59.5 million in production activity in those same years. For every dollar the state spent on film subsidies, it only got 11 cents back in gained economic activity and did not bring more jobs to the state.
According to research from the Mackinac Center, Michigan had fewer film-related jobs in 2015 than it did before the program was implemented. A report from the Michigan Economic Development Corporation in 2013 also found that film incentives created zero full-time jobs.
Cillian Murphy is J. Robert Oppenheimer in OPPENHEIMER, written, produced, and directed by Christopher Nolan. © Universal Pictures. All Rights Reserved.
The degree to which these programs grow despite the economic realities in their endless attempts to bribe (successfully, I should add) Hollywood to bring movie, TV, and commercial productions to their states is shown in the new proposal from Michigan, which gives productions a 25% credit for money spent on production, but ups it to 30% IF they include the tourism logo “Pure Michigan” in the closing credits!
They offer a 30% credit for hiring Michigan “residents” (how those are defined re. the temporary folks who come in to do a job and then stop renting is unclear) but even a 25% credit for NON-Michiganders, with zero requirement to only hire locals.
Transformers: Rise of the Beasts movie poster (2023), Paramount Pictures
Meanwhile, of course, various tax incentive programs have various public reporting rules, and those filings that WDWPro, That Park Place, and Valiant Renegade use from the UK to reveal the truth about spending on megaflops do not exist everywhere, thus not just saving Hollywood money but keeping its secrets from the public and stockholders alike. No wonder the industry loves them.
Meanwhile, abroad, some countries and governments are wising up. Newly elected Argentine President Javier Milei, famous for using a chainsaw to symbolize his fiscally wise intent to cut the waste in government has announced the nation’s “National Institute of Cinema and Audiovisual Arts” (aka, their subsidy of showbiz) will be feeling that blade’s buzz of demise.
Maybe government in the USA and elsewhere should stop giving Woke Hollywood these job-losing freebies and start giving taxpayers bigger star billing in their priorities.
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