Davis proposes steps to halt runaway production

By Gary Gentile The Associated Press
Saturday January 12, 2002

LOS ANGELES — Gov. Gray Davis unveiled a major initiative Friday to help stem the flow of film and television production out of the state, a practice that drains millions of dollars from the California economy each year. 

Davis proposed a wage-based state tax credit that could save film producers between $50 million and $100 million annually during the first three years of the plan that Davis wants to start in 2004, his office said. 

Industry groups have suggested a number of remedies, including the tax credit, which is similar to that offered by other countries, most notably Canada. 

“This is the most important issue facing this union legislatively and we certainly would welcome any efforts to help bring jobs back to the state,” said Lance Simmens, national director for governmental relations for the Screen Actor’s Guild. 

The governor’s proposal mirrors a national plan being considered by Congress that offers a 25 percent tax credit. 

Canada already offers wage-based incentives that can reach 35 percent of labor expenses. Those credits have cost the United States 25,000 jobs and $10 billion annually for each of the past three years, according to entertainment industry executives and labor officials. 

Davis wants to grant producers a 15 percent tax credit on the first $25,000 earned by workers on lower-budget productions if nearly all of the filming takes place within the state. 

The California credit would offset state taxes applying to the companies that make the films. Legislation will be required to implement the plan. 

“We’re creating an atmosphere that lets filmmakers know that California really wants their business,” said Davis, who announced the plan at a luncheon sponsored by the Hollywood Entertainment Labor Council in Burbank. 

Rep. Howard Berman, D-Los Angeles, welcomed the governor’s proposal. 

“That would be very helpful to us because showing that states that are most impacted are willing to make an effort will help in Congress,” said Berman, co-author of the tax credit legislation in the House of Representatives. 

Hollywood labor groups have been concerned about the loss of jobs resulting from Canada’s aggressive tax credits and other subsidies to lure production north of the border. 

Candidates for the Republican gubernatorial nomination stopped short of committing to a policy of wage subsidies for the film industry, although one took the opportunity to criticize Davis in general. 

Bill Simon’s press secretary, Jamie Fisfis, said runaway film production is just one example of how Davis has created an unfriendly business environment. 

“If they’re looking for a tax friendly environment in California, I don’t think they’re going to find it while Davis is governor,” he said. 

Former Los Angeles Mayor Richard Riordan said he supports leveling the playing field for California-based filmmakers. The entertainment industry was unfairly treated in international trade negotiations because films were exempted from antidumping clauses that protect other sectors, such as the steel industry, from foreign subsidization, he said. 

Bill Jones, the third Republican candidate, did not immediately return calls seeking comment.