Hollywood Wants A Bailout From American Taxpayers—The Response Should Be, 'Cut'

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0:57Steve Forbes: Hollywood wants a bailout from American taxpayers. The response should be cut.

1:08Steve Forbes: Hello, I'm Steve Forbes, and this is What's Ahead, where you get the insights you need to better navigate these turbulent times. The makers of movies and television series want help from Washington, But the requested subsidies won't cure what ails the entertainment industry. Now, it's true that the industry is having rough times. Thanks to generous incentives and outright subsidies, many films and TV series, and not just big budget ones, are being produced outside the U.S. in places like Canada, Britain, India, Australia, Hungary, and elsewhere. The employment numbers bespeak trouble. Employment has plummeted since 2022 from$150 ,000 to under$100 ,000 today.

1:54Steve Forbes: Labor costs are hugely high in the U.S. versus other locations. Washington is heavily unionized. Despite competition from other localities and countries and the feared threats to jobs from AI, Hollywood actors and writers went on a four-month strike in 2023. The costly settlement just made the industry's predicament worse. On top of that, Los Angeles hits Hollywood with all sorts of costly regulations and restrictions. Also adding pressure is streamlining. Movie ticket sales are down 40 % from 2019. Streaming services give independent movie makers distribution platforms for low-cost productions.

2:41Steve Forbes: AI and technological advances are enabling individuals to produce better and better entertainment products than ever before. The enormous complex film production infrastructure that Hollywood has developed over the years matters less and less. President Trump wants Washington to come to the rescue. He declared on Truth Social that Congress should immediately approve a federal production incentive to create entertainment jobs in America. Star-struck politicians in both parties like the idea. The industry has been rallying behind a bill of tax incentives called the Motion Picture Television and Entertainment Revitalization Act.

3:26Steve Forbes: The legislation would give the industry a special 20 % tax credit. If certain conditions are met, that number could go to 30%. But this isn't a normal credit against income taxes owed. It's actually a cash gift. That 20 to 30 % number is applied to labor costs. Say the labor expenses of a film are$50 million. The makers could get a cash payment of up to$15 million, even if the movie ends up with no income to tax. Moreover, 39 states have credits and subsidies of varying kinds and amounts. The federal credits would come on top of what these localities offer. Conceivably, taxpayer money could end up covering most, if not all, the costs of a film.

4:17Steve Forbes: Washington lawmakers are hammering out the details. For example, should the millions of dollars paid for a top actor qualify for a subsidy, or should it apply only for the production people like camera crews and makeup artists? But whatever the particulars, such legislation, though, won't cure what ails the industry because it doesn't get to the cost issues that have made America here increasingly uncompetitive, nor does it halt the technology that is increasingly undermining the traditional filmmaking ecosystem. The experiences of states like Georgia and New York, which have gone particularly big on tax credits, is that the costs actually exceed the benefits.

5:01Steve Forbes: The economies of subsidizing states are helped not at all. A Washington bailout will be no different. The best thing the federal government could do would be to enact the flat tax, which would sharply knock down individual and corporate tax rates, and continue whacking away at costly regulations, and get interest rates sharply lower by adopting a monetary policy that makes the dollar the most trusted currency in the world. Such measures would benefit everyone, including filmmakers. I'm Steve Forbes. Thanks for listening. Do send in your comments and suggestions and look forward to being with you soon again.

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