California Lawmaker: Why I Voted “No” On Giving Hollywood $750 Million in Tax Incentives

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The film industry, from the Hollywood sign to movie premieres on the red carpet, embodies a significant aspect of California’s identity. It’s understandable that state officials aim to maintain this industry within their borders. Nevertheless, offering hundreds of millions of dollars in targeted tax credits as a means to secure the industry may seem short-sighted and reveal underlying issues with how economic development is managed in California.

At the State Capitol, there’s nothing more widely appreciated than the film tax credit. Among the 120 legislators in the California Legislature, I was one of only two who opposed the recent proposals to broaden it. This fact speaks volumes. It’s not just about Hollywood’s influence, but also about the political dangers of challenging anything associated with glitz and glamour. Though the film industry is a significant part of California’s narrative, the tax credit it receives isn’t the kind of economic strategy that benefits our state in the long run.

“Show Me the Money!”

The current budget debate significantly increases the annual film and television tax credit in California from $330 million to $750 million. Given that the state currently has a $12 billion deficit, this move raises valid concerns about our commitment to economic priorities. California’s budget is not infinite, and a good program should not be judged solely by how quickly it exhausts resources.

In a recent article published by Politico, producer Scott Budnick expressed his optimism about the state’s proposed $750 million expansion, stating, “I hope we spend this money quickly, and I’ll need to ask the governor for more funds next year.” While this comment may have been made in jest, it implies a significant commitment and potential future requests.

Earlier this year, the impartial Legislative Analyst’s Office (LAO) published a report stating that there is no solid proof indicating that film tax credits boost the overall size of the state’s economy. This finding deserves our careful consideration.

A Benefit for One Region, Not the Whole State

Policy for economic growth in California should aim to uplift all its regions, not just bolster the strengths of one. At present, we’re issuing large subsidies to an industry that is predominantly based in greater Los Angeles, which is already economically powerful within the state. Moreover, the nature of this industry is transient; once a film or TV production wraps up, the set is dismantled.

Instead of comparing it directly, consider this: Industries similar to manufacturing tend to flourish in areas where employment opportunities are scarce. By investing public funds into such industries, we achieve a more even distribution of economic growth and longer-lasting outcomes.

Opportunity Cost: What Are We Missing?

Each dollar spent on film subsidies means one less dollar available for other uses, which is known as the opportunity cost. Given our massive budget deficit and the increasing demand for essential services, it’s crucial that we carefully consider our priorities.

Reading Dan Walters’ latest piece in CalMatters really struck a chord with me as someone who hails from an overlooked industry. It seems that while agriculture continues to generate around $60 billion yearly, approximately double the economic impact of the film industry, we’ve been left high and dry when it comes to support from our policymakers.

In contrast, Governor Newsom is pouring a substantial $750 million into a film tax credit, all while grappling with a whopping $12 billion deficit. It feels like the focus has shifted away from the backbone of our economy and towards the glamour of Hollywood. I can’t help but feel that farmers deserve more recognition and assistance in these challenging times.

Conducting business in California can be quite demanding due to its high costs. In the 2024 rankings by CNBC, we were placed 45th for business costs and at the bottom for cost of living. This isn’t a mere coincidence; it’s the foreseeable outcome of policies implemented over decades that have accumulated regulations upon regulations, taxes upon taxes, making it so that some companies decide to expand in other areas instead.

The movie tax credit, similar to other sector-specific incentives, serves as an effort to mask underlying systemic problems. Essentially, it means, “We acknowledge that operating here can be costly, so we offer a tax reduction to offset the expense.” This can be described as a form of crisis management or damage control.

Toward a Broader Vision

The movie tax credit could potentially extend our filming duration in Los Angeles by a few months, but it won’t mend the issues we’re experiencing in Fresno, Redding, Eureka, or Sacramento. It won’t reduce housing costs, simplify construction or hiring processes, or boost California’s position in terms of business environment or bring us up from the bottom on affordability.

I’m pleased that California houses the globe’s most innovative minds. Yet, if my fellow legislators at the State Capitol aim to nurture this industry, let’s address the cost of living. Let’s transform California into a destination where people and businesses choose to stay without relying on incentives.

Supporting Hollywood means truthfully identifying what benefits its workforce and our state. At times, putting the greater good first necessitates stepping away from the accolades and choosing “The Road Not Taken”: a path less chosen, which ultimately makes a significant impact. This is echoed in Robert Frost’s poem: “Two roads diverged in a wood, and I—I took the one less traveled by, And that has made all the difference.

2022 saw the election of Senator Niello, who currently serves District 6 of the California Senate. This district encompasses sections of Placer and Sacramento Counties. Prior to his political career, he was a Certified Public Accountant and subsequently joined the Niello Auto Group, managing retail automobile dealerships within the family business. In the State Senate, Senator Niello holds the position of Vice Chair for the Budget and Fiscal Review Committee, Banking and Financial Institutions Committee, Insurance Committee, and Judiciary Committee.

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2025-06-27 17:24