Thursday, November 6, 2008


by smf for LAKids from articles in the LA Times, the FATR website and wire services reports

California lawmakers are heading back to work in Sacramento to address a state budget that is projected to go as much as $25 billion into the red.

In the midst of this, Gov. Schwarzenegger will seek to push through over $100 million in tax credits for film industry companies that do business in state during the budget-focused special session. Schwarzenegger and film industry officials claim the credits are needed to keep California a competitive location for such activity.
FRIENDS OF AMERICAN TAX REFORM – a group that apparently shares Sarah Palin’s belief that paying taxes is not a patriotic duity - seems to at least philosophically supportive of this ….but question:

California is the biggest borrower in the municipal-bond market and has $51.9 billion in general-obligation debt outstanding. Because California is so dependent on bonds and credit financing - the state budget mess directly contributes to the international credit mess.

The governor is expected to unveil the proposal this week, after the Legislature opens a special session to address the state's fiscal crisis. Schwarzenegger’s proposal, part of his plan to stimulate the state economy, is similar to his previous bids for such a tax break - rejected in the past.

  • The tax concessions would probably cost the state at least $100 million a year.
  • They are being proposed at a time when the state budget is $10 billion in the red, less than halfway into the fiscal year.
  • The tax cut could be overshadowed by billions of dollars in sales tax hikes the governor has told education officials he wants lawmakers to approve.

Administration officials say the cut is necessary to stop the industry's migration out of state. As an example, they cite the recent departure of Disney's hit television series "Ugly Betty," which relocated to New York.

Five years ago, 66% of all feature film production took place in California. Last year, the state claimed just 31%. About 250,000 Californians work in the industry.

The governor's proposal tries to address the critics' concerns by extending the tax breaks only to new shows and those relocating to California from elsewhere. Productions already in California and unlikely to move elsewhere would not qualify.

Lenny Goldberg, executive director of the nonprofit California Tax Reform Assn. in Sacramento. suspects that companies the tax break is not intended to help would find ways to take advantage of it. Goldberg also is troubled by the way the credits would be structured. Even companies that pay no state taxes could cash in.

"We're sort of skeptical of this happening because so many times it's been dangled out there, and so many times it's disappeared," said Barry Broad, a Sacramento lobbyist for the International Brotherhood of Teamsters, which represents thousands of film industry workers. Broad also questioned the timing of the bid. He said his union did not support the tax break if paying for it would require more deep cuts in government services.

But filmmakers say the state's dismal finances should bring more urgency -- not less -- to the proposal.

"Desperate times call for desperate measures," said Stanley Brooks, president of Once Upon a Time Films in Santa Monica and chairman of the California Film Commission. He is an appointee of the governor.

Brooks, whose company produces television movies and miniseries, said the tax credits would boost local production, creating jobs that would bolster the state economy.

The GOP lawmakers who typically line up behind tax breaks have been wary of the governor's concept in the past. The tax concessions would aid an industry dominated by deep-pocketed Democratic political contributors.

And Republicans have questioned whether they would create the jobs that Schwarzenegger and other backers promised.

The Republicans in the legislature continue to pound the drum for "No New Taxes"; against that wall of sound it becomes easy to call for “No New Tax Breaks!”

No comments: