Like a gunslinger firing his Colt into the air before leaving the saloon, Gov. Gavin Newsom had one last shot at the entertainment industry before leaving Dodge in January: He pushed the cap on California’s film tax credit from $750 million to $1 billion.
Having already engineered an increase in the credit cap from $330 million to the current $750 million last year, the governor has the idea that saving Hollywood productions in California could happen with another increase in the cap by a large percentage, along with some smaller related incentives. “California created the modern entertainment industry; we’re the entertainment capital and we’re going to keep it here,” he said, sounding like a guy who forgot he’s no longer campaigning.
Like the weapon of this hero of Western cinema, this decision caused a lot of noise. And like the Western cinema hero’s bullet, it will do little damage.
Even if the new Legislature and governor manage to pass the proposal in a climate without corporate giveaways (and the tax credits do, contrary to arguments to the contrary, they reimburse a business), the cap only allows producers to get more money; it doesn’t actually include the gift. The $750 million cap will likely be reached this year, but that doesn’t guarantee there will be enough qualified productions to close the $1 billion shortfall.
But even if all of that extra $250 million in allocations were distributed, the idea that it would allow productions to stay is flimsy and largely unproven. Financial incentives alone are unlikely to get many people to make a film or change their minds and do it elsewhere. There is now a significant body of independent research that shows that slightly cheaper production is actually only a small factor in where a movie or TV show is filmed, among many other often powerful factors such as actors’ schedules, location necessities, and producers’ preferences, on what is both a psychologically and logistically complex issue with no single antecedent.
A landmark study by Tulane economics researcher Patrick Button several years ago found that a tax credit program was responsible for an average of 1.5 new TV series in a state — hardly evidence of a game-changer. “Government film incentives have had no significant effect on jobs in the film industry or related industries,” he concluded. Not all of these gifts achieve their purpose; in fact, for any productions that would have been filmed in a state anyway, they are simply removing tax revenue that would have gone to schools, roads, and hospitals.
But the real reason why expanding California’s tax credit cap system is a bad way to think about business startup wiring is that it completely ignores California’s biggest disadvantage.
The state Already has the most generous tax credit program in the country by many measures – up to 45 percent for a large number of productions, compared to a cap of 30 percent even in a generous state like Georgia. What it lacks compared to Georgia is low prices. Georgia’s cost of living is 39 percent lower than California (the most expensive state in the Lower 48), which means housing, food, and transit for cast and crew are on perpetual sale at half price—the kind of thing a little money in possible one-time incentives can’t compete with. Of course, addressing affordability is a trickier task than issuing press releases.
The way you know the real problem isn’t the tax credit caps is that the already massive increase in those caps hasn’t seemed to solve the problem at all: After the doubling of the cap in the summer of 2025 caused a brief bump in production, shooting days in Los Angeles have now actually decreased by 23% since then. It’s not exactly a piece of data that makes you say, “Let’s try to increase it again.”
Policymakers (with the support of Hollywood lobbyists) tend to view oversubscription to California’s credit program as a sign that it is working and effectively preventing productions from leaving. But of course, it doesn’t necessarily mean that. This could just mean that many productions that would be in California anyway would see an opportunity to make more money.
Gn entert
