Does the Movie Business Deserve California’s Tax Money?
by Byrne Hobart
California’s unusually high sales tax may get even higher thanks to a new tax plan. The weird part isn’t that California will be raising sales taxes from 7.25% to 8.75% — it’s what the planned tax increase will pay for.
The core of Arnold Schwarzenneger’s new budget plan is an increase in taxes to pay for the state’s current budget shortfall: in addition to raising the sales tax, he wants it to apply to some services. He’s also raising taxes on alcohol, cigarettes and energy.
But one industry gets a tax break: TV and movie companies could get millions from other initiatives.
It’s not surprising that the state would want to tax some industries and subsidize others, but it’s disturbing that they’d need to help that particular industry: there is no state with as much access to the talent, capital, and expertise necessary to make movies. There is almost no reason for an ambitious person who wants to enter that industry to go anywhere but California. Schwarzenneger could easily get away with taxing them more, instead: ask yourself how high taxes would have to be for Universal Studios to relocate to, say, Milwaukee.
One of the most common problems with tax policy is that the industries with the most clout are also the ones least likely to need handouts. There isn’t any way to fix it — clout is usually a function of lobbyists hired, and more profitable industries can hire more lobbyists — but it’s helpful to see through the obfuscation. California’s taxpayers will pay the state a little more money, in order to give more money to one industry that isn’t going to do anything new with it (except, perhaps, lobby a little more next year).