Best state in a supporting role

THE luminaries of the film world flocked to Los Angeles this week to celebrate the 71st Golden Globe awards and quiver before the unveiling of the Oscar nominations. But more often they travel the other way. Thanks to generous incentive schemes offered by other states and countries, America’s movie capital has lost its lustre: only two live-action movies with budgets over $100m were filmed in Los Angeles last year. Half as many feature films were produced in the city last year as in 1996, according to Film LA, a private non-profit organisation. Television drama is 39% below its 2008 peak.

Moolah for moguls

In America the craze for this peculiar type of corporate welfare began in 2002, when New Mexico set up a juicy programme of tax credits and interest-free loans. By 2007 30 films were being shot in the Land of Enchantment and other states wanted in; by 2009 only a handful did not offer producers some kind of bribe. It was New Mexico’s tax credits, not its vast desert skies, that lured the TV hit “Breaking Bad” (pictured) away from California.

For years Californian legislators clung to the idea that film production could never leave their state even as the data showed the opposite. Finally in 2009, after a beloved sitcom fled to New York, the state approved the “Ugly Betty bill”, which appropriated $100m a year to pay for tax credits worth up to 25% for productions, including some types of television, with budgets under $75m (thus excluding blockbusters). Demand for the credits, assigned by lottery, far outstrips supply. Yet the exodus has not stopped; producers prefer to work at home, but it is difficult to compete with the likes of Louisiana’s 40% credit or New York’s annual $420m budget.

More must be done, some say. Eric Garcetti, Los Angeles’s mayor, has appointed Tom Sherak, an old industry hand, to lobby in Sacramento, the state capital. Hollywood insiders doubt his chances; public-sector unions, who would rather the cash was spent on public-sector workers, will fight any expansion of the scheme. But Mr Garcetti says he is “remarkably optimistic” that something will get passed this year.

That would please film workers, who are tired of travelling out-of-state or, worse, to London or Vancouver. But would it be sensible for fiscally-squeezed California? The answer is not obvious. How do you calculate the opportunity costs of a dollar spent on film rather than firemen? How do you know which productions would have come to the state without the incentive? Outside California long-running schemes can spawn indigenous film industries: later this month Pinewood, a British studio, will open a 288-acre facility in Georgia, citing its “great crew base”.

Still, most independent research finds that tax credits for filmmakers serve mainly to help—drumroll, please—filmmakers. A study in Louisiana found that for every dollar the state received in revenue from film production, it spent $7.29 in credits. Jobs created by productions often do not last. States bid against each other (and foreign governments) to offer bigger bribes. In many states producers can sell their credits on; independent markets, brokers and lawyers have sprung up to service them.

So why do these schemes remain so popular? Partly because politicians like having their photo taken with movie stars. And partly because film and TV are footloose, labour-intensive industries. “Chicago” (2002) was filmed in Toronto; “Battle: Los Angeles” (2011) in Louisiana. Indeed, wounded pride can be an effective driver of legislation. Georgia fattened its tax incentives after “Ray” (2004), about Ray Charles, a Georgia native, was shot in Louisiana; Nevada, one of the last holdouts, approved a credit last year after being passed over in favour of New Mexico for the filming of “Vegas”, a period television drama.

The other answer is that handouts for moguls are not as popular as they once were. Several states have capped or scrapped their programmes; Joseph Henchman at the Tax Foundation, a think-tank, reckons they peaked in 2010. Michigan’s scheme, which some thought—absurdly—could make up for job losses in the car industry, was scaled back under a Republican governor. Despite hosting “Iron Man 3”, one of last year’s smashes, many in North Carolina want to let their state’s scheme wither. “At some point you accept that Louisiana is determined to pour its treasure into Hollywood’s pockets,” says Mr Henchman, “and you let them do it.”