Strike should spur LA film tax credit reform

A stroke of good luck for Louisiana taxpayers, the strike by writers and actors of motion picture and television productions can be leveraged even more for the state’s citizens to avoid the bad consequences of its poorly-conceived Motion Picture Investors Tax Credit.

First writers, then actors began the strike starting over three months ago. This brought largely to a halt an already slowing production of movies and series, whether shown in theaters, on broadcast television, cable television, streaming over the Internet, or in podcast form, although some films in progress actor members have been allowed to complete. Anticipation of a strike as early as late last year had prompted ratcheting down production, so as not to have things interrupted if a strike occurred. To work with a network or major studio (which comprise most of the business; for example, the top ten studios in movie box office receipts for last year collected seven-eighths of all revenues), writers and actors must be a member of their respective unions.

The main issue in both cases is revenue-sharing. The rapid growth in streaming particularly has exposed that prior compensation models didn’t account for this, leading members to demand a greater share of the pie from that. Both also want more control over the use of artificial intelligence in story writing and actor likenesses. Writers additionally want retainer pay for stretches that they don’t work.

These fall under a much larger theme: an industry used to centralization of economic control through cooperation of management and labor has lost that control because, simply, the economics have changed so that far more people at far reduced costs can create profitably content. Old producers and unions have come to loggerheads because the decentralization trend has more forcefully affected the fortunes of the latter.

But the unions involved – both extremely top heavy with the vast majority of earnings going to a handful of members in each – also by their actions have impacted other people who work in the industry and in much greater numbers. Audio-visual content production requires a slew of behind-the-scenes labor, almost exclusively contract in nature. Shutting down production also shuts down at least part of the livelihood of many individuals, as most work part-time, but for some its entirety.

That has hit Louisiana disproportionately hard, given its generous taxpayer subsidization of film and television production to the tune typically of $150 million annually which artificially has boosted this activity and created a kind of workfare for people who want to work around the movie business. Nobody should kid themselves that in absence of the credit that business would be no more than a fraction of what it is, or that the credit is a net money-maker for taxpayers, as study after study has shown (the latest, most optimistic shows it returns 23 cents on the dollar while costing $13,300 for each job “created”).

Thus, the slowdown will help Louisianans save money, as fewer productions will occur and fewer credits dispensed. But the overall theme that triggered the strike now has a chance to insert itself into policy-makers’ consciousness, which it apparently didn’t this past legislative session when with only some beneficial changes the tax credit foolishly was renewed.

And, the idea to accomplish this reform to keep up with the times actually came years ago from Republican Lt. Gov. Billy Nungesser, running for reelection this fall. He suggested that part of any contract with an entity qualifying for the credits contain a clause that, if the production made a certain amount in revenues, the state take a cut.

This can be designed to capture streaming revenues, and in a way to help local producers; the overwhelming majority of credit dollars go to out-of-state entities. The law could be changed to charge gross revenues to the parent corporation or other entity in a tiered system. For example, there would be no tax reimbursement for a production that in a decade after release doesn’t collect $1 million, but then from there to $10 million one percent is charged, two percent up to $20 million, and so on every $10 million until reaching $100 million and beyond where it becomes a fixed 10 percent. This shields smaller producers such as those in-state as an incentive to grow, ensures that creative accounting doesn’t hide revenues, and reasonably accounts for present and future streaming.

As currently constructed, the film tax credit is nothing more than a jobs program for a favored political constituency that wastes taxpayer dollars and distorts the economy into a preferred direction picked by government. Ironically, people in the spillover industries that have benefited from this now suffer precisely because of it and its vulnerability to what happens in Hollywood. Had the reimbursement idea been in place, it would have been less buffeted by Hollywood developments because it would have helped stimulate an indigenous film industry outside of the current labor dispute. The new Legislature next year needs to make this modification.