Newsom wants to more than double California’s film industry tax credit. Would it pay for itself?

The identity of the film and TV industry is tied up with California, but Governor Gavin Newsom and some lawmakers want you to know that’s not written in stone. The state’s production has been in decline since the 2000s. While the governor is proposing to double tax incentives to keep more films and shows in-state, others argue it’s at the expense of vital programs and won’t pay for itself. 

Sacramento has a film studio tucked in an industrial park off of I-80 — the Sacramento Film Center. 

Cinematographer Aaron Leong used to spend a lot of time here. On a recent morning, he checked in with some friends and former colleagues working on a chicken wing ad.  

“I've done a bunch of commercials here,” he said. “Some for a couple of different board games or toys.”

Leong has also done political ads, a YouTube series and a Jack the Ripper movie — all in this space. 

Even this far from Los Angeles, he said he used to work pretty consistently. Then, the pandemic and union strikes slowed production down. 

“Right now we're taking every gig I can get,” he said. “Luckily, my wife has a full-time job and she's helping support that, but if it was just me — man, I don't know what would happen.”

Many productions have also moved out of state. John Christensen runs this studio and he said local talent tends to move with them. 

“I see some of the people we work with sometimes are going to another place and not staying in town, not staying in our state, which is unfortunate because that revenue can be brought to here instead of going to some other place,” he said. 

Data from the U.S. Bureau of Labor Statistics show that California was home to about 45% of motion picture production in the 1990s. Now, that figure is less than 30%. 

Governor Gavin Newsom wants to fix that. Late last year, he proposed more than doubling the state’s film and tax credit, capping it at $750 million each fiscal year through 2030. His office cited a study in a press release saying each $1 of credit generates about $24 for the economy. The increase was in his January budget proposal. 

Democratic Assembly member Rick Zbur from Los Angeles supports that increase. 

“This is about making sure that we are retaining really important, high skilled, high wage jobs in California,” he said. 

Zbur added that expanded tax credits in other states play a large role in California losing productions. Georgia — for example — offers tax breaks of up to 30% of a production’s base investment and unlike California, has no cap on its program. 

Zbur said California has to be more competitive.

“If I believed that the tax credit was taking funds away from other things we need to do to care for the people of California, I would be less enthusiastic about it, but these tax credits pay for themselves,” he said. 

California Budget and Policy Center Senior Policy Fellow Kayla Kitson disagrees. 

“All the credible research out there on the return on investment of film credits is they do not pay for themselves as some of the proponents claim,” she said. “They really are a net cost to the state.”

A 2023 report from the California Legislative Analyst’s Office discouraged lawmakers from looking at the credits as a reliable source of income. It also contradicts the study cited by Newsom’s administration that says the credits more than pay for themselves.

State officials in New York also reported in 2023 that its tax credit program was, at best, breaking even and most likely costing the state. And in Georgia, officials estimate the state’s return on investment is about 19 cents per dollar it spends. 

Kitson, with the California Budget and Policy Center, said these studies raise questions for her about the value of the tax credits, especially as the state is forecasting tighter budgets in the years to come. 

“This is one of the few new investments that the governor proposed and it really stands in stark contrast to the lack of proposed new investments in areas like homelessness and affordable housing,” she said.

The budget is also likely to change in the months ahead — possibly a lot. Between fire relief for Los Angeles and threats to federal funds, California is weighing more strains to its purse than it was when Newsom proposed the credits.