During the Great Depression, Hollywood responded with feel-good musicals and inexpensive entertainment for a nation mired in economic distress. The studios made money, people had a chance to escape their woes for a few hours at minimal cost, and private industry provided employment outside of the government dole. They mostly stayed out of politics — mostly — and thrived without subsidies until World War II and the eventual economic recovery.
Now Hollywood, with its astronomical salaries and budgets, faces a new economic crisis. What do they do? Ask for a bailout from their political allies — and get it:
The Senate bill includes a tax break worth up to $246 million over 11 years for investors in bigger-budget movie projects that don’t necessarily qualify for incentives currently. The provision is backed by firms like the Walt Disney Co., and the industry trade group the Motion Picture Association of America, according to aides and lobbyists.
Broadly speaking, the Senate bill includes a one-year extension through 2009 of a provision enabling companies to write off 50 percent of the cost of equipment placed in service during that year, same as in the House Ways and Means version. But the Senate bill amends the definition of “qualified property” to include “certain motion picture film or videotape,” bringing the cost of the Senate provision to $5.32 billion, up from the House’s $5.07 billion version.
Companies that use the tax break would then forfeit the right to use the existing incentive, which allows companies to deduct 100 percent of production costs up to $15 million. That provision is backed by groups such as the Directors Guild of America and is aimed at keeping smaller productions from relocating to foreign countries; it was extended as part of the $700 billion financial rescue plan in October.
But a problem arises for pictures that cost $30 million or more, which the option to instead use bonus depreciation attempts to resolve.
So we are going to provide a $250 million tax subsidy to the motion picture industry? This doesn’t employ anyone; it just gives an accelerated depreciation on equipment. Nor does the entertainment industry need much help to achieve profitability. All they need to do is produce better movies, and perhaps start reining in costs rather than seeking tax cuts for big-budget spectacles.
This isn’t a stimulus. It’s a payoff for the political support Hollywood provides the Democrats. Worse, it looks like a way to give film producers a boost in extending the liberal message that really needs little prodding already from Tinseltown.
The Republicans have targeted this provision in an upcoming Senate amendment. Let’s hope they succeed.
Update: A rare piece of good news. Tom Coburn’s amendment to strip this provision from the stimulus passed, but just barely, at 52-45. I’ll look for the yeas and nays to see which Democrats were too embarrassed to vote no.
Update: Below are the yeas and nays. Note the lone Republican who voted to protect the Hollywood subsidy:
What the heck was David Vitter thinking?
The Democrats who supported the amendment, thus rejecting the Hollywood subsidy, are mostly moderates with a track record of some fiscal sense. The most hilarious exception is Robert Byrd’s nay vote, belying his reputation as the Senate’s Pork King. What happened — did the film industry refuse to rename the town Byrdwood?