The Tax Credit Conundrum: Why Hollywood’s Request Goes Beyond Its Own Industry

The proposed federal film and television tax credit has been touted as a boon to Hollywood, but its implications stretch far beyond the glitz of Tinseltown. To compete with foreign production hubs, this incentive is not just about preserving jobs in California – it’s an economic lifeline for states across the country hemorrhaging productions.

The conventional wisdom frames film incentives as a perk for Los Angeles, a favor to the entertainment industry elite. However, this narrow focus misses the reality of where American productions actually film today. The studios may be headquartered in L.A., but their productions have been migrating elsewhere for years – driven by rising costs, complex permitting processes, and infrastructure challenges that make Los Angeles less competitive.

Georgia, Louisiana, Ohio, and Florida have invested heavily in soundstages, developed skilled local crews, and created competitive incentive packages. These states reaped the rewards of production jobs and related tax revenues, but are now bearing the brunt of the exodus. For example, Georgia’s decline from $4.4 billion in 2022 to a 10-year low of $2 billion last fiscal year is a stark reminder that even these incentives can’t compete with what foreign governments offer – combined with lower labor costs.

The UK’s 40 percent tax credit, backed by its national treasury and vast soundstage capacity, has become the gold standard for big-budget productions. Canada’s stacked federal and provincial credits create combined incentives exceeding 50 percent in provinces like British Columbia and Ontario. The streamer revolution has only accelerated this trend, with Netflix increasingly filming abroad while producing fewer shows overall.

When a production can save 40 to 50 percent or more by filming elsewhere, no individual state tax credit can close that gap alone. With approximately 80 countries offering national tax credits – the US is one of the few exceptions – it’s clear that this isn’t just an American issue.

The existential crisis facing the American film industry adds to the urgency: shrinking production numbers, competing forms of entertainment, and the specter of AI are all contributing factors. But these aren’t just jobs for actors and directors; film productions employ working-class Americans from electricians to caterers, pumping millions into local economies with every major production.

A federal credit is naturally bipartisan because it would level the playing field against foreign competition, letting American states compete on their own merits. Democrats have long supported the industry, while Republicans representing production hub states understand that this is about preserving local jobs. A federal incentive wouldn’t pick winners and losers among the states – it would provide a baseline of 20 percent for qualified domestic spending, with bonuses for productions in underserved regions.

States could still differentiate themselves with additional incentives, infrastructure investments, and workforce development – but they’d be competing on a level playing field. Even states like Florida, which let its production incentive lapse in 2016, could benefit from a federal credit. The details of such a program are still being worked out, but the potential impact is clear: it’s not just about preserving Hollywood’s status quo; it’s about creating a sustainable future for American productions and the communities that rely on them.