From the Hollywood sign to red carpet premieres, the film industry is one of the identities of California. It’s no surprise that state leaders want to keep the industry anchored here. However, the way it is being done through hundreds of millions of dollars in targeted tax credits is shortsighted and displays a deeper problem with how the state approaches economic development in California.
At the State Capitol, it is hard to find anything more popular than the film tax credit. Out of 120 lawmakers in the California Legislature, I was just one of two legislators who voted against the latest proposals to expand it. That alone says something. Not just about the influence of Hollywood but about the political risk of questioning anything wrapped in lights and cameras. While the film industry is part of California’s story, the tax credit it receives is not the kind of economic policy that is good for our state.
“Show Me the Money!”
The latest push in the budget discussions more than doubles the state’s film and television tax credit from $330 million to $750 million annually. At a time when the state is facing a $12 billion deficit, this approach invites legitimate questions about how seriously we’re treating economic priorities. California’s budget is not limitless, and a good program should not be measured by how fast it’s depleted.
In a recent Politico article, producer Scott Budnick said of the state’s proposed $750 million expansion: “My hope is we blow through this money, and we’re gonna have to go back to the governor for even more next year.” His comment may have been lighthearted, but it speaks volumes.
In a report released earlier this year, the nonpartisan Legislative Analyst’s Office (LAO) concluded that “there is currently no compelling evidence to suggest that film tax credits have a positive effect on the size of the state’s economy overall.” That should stop us in our tracks.
A Benefit for One Region, Not the Whole State
Economic development policy should be about lifting up all parts of California, not just reinforcing the advantages of one region. Right now, we’re writing massive checks to an industry that was already heavily concentrated in greater Los Angeles, one of the state’s most economically dominant region. Then there is the nature of the industry itself. Film and television productions are temporary by design. A movie ends, and the set is torn down.
Compare that to manufacturing infrastructure, industries that, when supported, often grow in communities that need jobs most. When we spend public dollars to support those sectors, we get more balanced growth and more durable results.
Opportunity Cost: What Are We Missing?
Every dollar we pour into film credits is a dollar we can’t use elsewhere. That’s the opportunity cost. With a multibillion-dollar deficit and growing pressure on core services, we have to ask hard questions about priorities.
A recent CalMatters column captured what many in overlooked industries are feeling. As columnist Dan Walters pointed out, agriculture still generates nearly $60 billion annually, roughly twice the estimated economic footprint of the film industry. Yet as farmers face rising labor costs and environmental regulations, policymakers have offered them little relief. Instead, the political spotlight has turned to Hollywood where Governor Newsom is making a $750 million film tax credit his top budget priority despite a $12 billion deficit.
California is a challenging place to do business. CNBC’s 2024 rankings put us 45th in cost of doing business and dead last in cost of living. That’s not a coincidence. It’s the predictable result of decades of policies that have stacked regulation upon regulation, tax upon tax, until many employers simply choose to grow elsewhere.
The film tax credit, like other industry-specific incentives, is an attempt to patch over these deeper structural issues. It’s a way of saying, “We know it is expensive to be here, so here’s a tax break to help.” That is a definition of damage control.
Toward a Broader Vision
The film tax credit might buy us a few more months of production in L.A., but it will not fix what is broken in Fresno, Redding, Eureka or Sacramento. It will not lower the cost of housing. It will not make it easier to build or hire or grow. It will not put California back in the top 10 for business climate or lift us from the bottom on affordability.
I’m proud that California is home to the world’s most creative professionals. However, if my colleagues at the State Capitol want to support the industry, let’s talk about cost of living. Let’s make California a place where people and businesses want to stay without needing a subsidy.
Respecting Hollywood means being honest about what actually helps its workers and what helps our state. And sometimes, doing right by the whole requires stepping away from the applause and choosing The Road Not Taken: “Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference.”
Elected in 2022, Senator Niello represents California Senate District 6, which covers portions of Placer and Sacramento Counties. He first began his career as a Certified Public Accountant and then joined his family business, the Niello Auto Group, running retail automobile dealerships. In the State Senate, Senator Niello is the Vice Chair of the Budget and Fiscal Review, Banking and Financial Institutions, Insurance and Judiciary Committees.
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