From an office in an average working-class American town known as "Beverly Hills," the production company behind the smash hit Netflix original series "House of Cards" has sent the governor of Maryland a letter that intonates that, should the company not receive additional tax credits from the state for their production, they will look to move their productions out of the state.
Image source: Netflix
Kevin Spacey, who stars in the Netflix series "House of Cards."
Hollywood's film and television industries have made big business out of receiving what is known as tax credits from the states (and sometimes non-American jurisdictions) where they film. These tax credits are a misnomer. While the type varies between refundable or transferable, they are really more like cash grants and reimbursements that can often exceed the tax burden of the production company in that state. That means that production companies are seeking taxpayer dollars to secure filming in their city and state; taxpayer dollars which ensure that the company pays little or no taxes and as in the case of the millions paid to the company behind "House of Cards," actually gets reimbursed for a portion of the production costs.
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Now, like any other business, the production company owes its shareholders the duty to find the best deal and to negotiate with different states to get as many incentives as it can for production. Cities and states who compete with each other and even foreign locals to bring economic boosters and job creators to their home locations have to give tax breaks and other incentives to companies to ensure that companies set up shop in their locale. However, the film and television industry varies from other businesses in two ways.
First, Hollywood productions differ from other business concerns as they are temporary endeavors. Films shoot for a period of months on locations. Television shows, if they are lucky, will make it a few seasons. That means that the jobs that they are creating are temporary and therefore not as beneficial to the state as an established business opening there. They also may come with some additional costs and inconveniences, such as street closures or utilizing police resources. In fact, there have been several studies, including one from the State of Michigan in 2010, calling into question whether film credits and subsidies produced enough benefits to justify them.
The second issue is the blatant hypocrisy that both surrounds and stems from Hollywood. The ultimate champions of a progressive agenda, it's more than ironic that Hollywood productions think that everyone should pay their "fair share" of taxes—except for them.
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The majority of the limousine liberals in Hollywood aren't afraid to jump into the fray on backing progressivism, as long as it comes at someone else's expense and they can point the fingers elsewhere. Martin Sheen, father of model citizen and nine-figure wealth holder Charlie Sheen, has been quoted as lamenting the greed of Corporate America, saying, "What about Corporate America sharing some of its profits, investing back in the country? You know, they talk about patriotism. They're more interested in profits, you know? That's where the problem lies. It's Corporate America…". Yes, "Corporate America" is the problem from the father of a true patriot—one who has amassed an enviable fortune working part time and is notorious for violence against women and enjoying various illegal pastimes.
From Jon Bon Jovi to Bruce Springsteen, who both use agriculture loopholes to pay minimal property taxes on their owned properties, to the production companies who seek taxpayer funding of their million-dollar generating hit films and television series, Hollywood's elite doesn't think they should have to play by the same rules they advocate for.
The hypocrisy spills over into the American people. Those who lament the outrageous pay of CEOs are mum when it comes to Robert Downey Jr.'s $50 million payday for pretending to be a comic book character or Jennifer Aniston's continual multimillion salaries for a string of box office mediocrities (apologies for the harsh words, Ms. Aniston, but's its true).
Apparently job creators and one-percenters are only not greedy if they are good-looking, famous and create glamorous but temporary jobs (side advice to Jamie Dimon: note that glamorous/temporary job creation is clearly part of the key to avoid the outrage).
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I believe in economic incentives to create a business-friendly, job creating environment. I believe that being pro-business of all kinds — big, small and even Hollywood-backed — helps to create growth. I have no problem with tax incentives or even outright subsidies if they can be backed with an attractive return on the investment to the state and the citizens that issue them.
However, I do have a problem with hypocrisy. If you are so outraged by something, you shouldn't be first in line to participate in that something.
My advice to Hollywood: Take your credits, make your films and then be quiet or risk Americans eventually figuring out that you are the wolf in sheep's clothing.
— By Carol Roth
Carol Roth is a "recovering" investment banker (corporate finance), entrepreneur/small-business owner, investor and author of "The Entrepreneur Equation." Follow her on Twitter @CarolJSRoth.