Report: Beware the 'Race to the Bottom' of Film Tax Credits

Although over half of the film industry's jobs are located in Los Angeles County, recent competition from states like Louisiana have been gaining on California by offering deep tax credits to the film industry. California even responded by creating a tax break of its own. In Los Angeles, the exodus of the film industry is referred to as "runaway production," but a new report, released yesterday by the California Legislative Analyst's Office (LAO), might have coined a new term: "the race to the bottom."

"If the Legislature wishes to continue or expand the film tax credit, we suggest that it do so cautiously," states the LAO report. "We highlight several factors to consider. Specifically (1) responding to other jurisdictions’ subsidies could be very expensive and (2) for state government, the film tax credit does not 'pay for itself.'"

Among the report's pithy observations: "Interstate and international competition could stoke a 'race to the bottom,'" even as the film industry struggles in comparison with the recovery of other portions of the economy.