From The Los Angeles Times

The California Film Commission's incentive program
In several respects it's a model for how the Legislature should approach corporate tax breaks.
Editorial
August 23, 2010

It took just one day for the California Film Commission to allocate all $100 million in subsidies the Legislature provided to lure film and TV crews to the state this year. The commission granted tax credits to 30 productions; at least 30 more landed on a waiting list, where they're not likely to stay. Instead, they're expected to set up shop in other states with competing subsidies.
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That's the reality of the film business today — it's a mobile industry that can take much of its work to whatever state or country that makes the most sense economically. With other states forgoing more tax revenue to attract movies, TV shows and commercials ( New York, for example, just increased its subsidies to $420 million a year), California's grip on the market is slipping. We have some concerns about tax breaks aiding productions that would have been shot here anyway, but the jobs lost to other locales have become a bigger worry.

Although the state's budget problems make it hard for lawmakers to expand any program that costs money, Democratic leaders have included about $300 million in their budget proposal for job creation. The film subsidies clearly bring jobs to the state and stimulate the economy — the credits awarded last year are expected to generate more than 22,200 cast and crew positions that, according to the film commission, almost certainly would not have come to California without the tax break. Those workers pay taxes too, as do the businesses where they spend their money.

The film incentives program has some flaws — too many projects are ineligible, and there's no preference given to productions with subsidy offers from other states — but in several respects it's a model for how the Legislature should approach corporate tax breaks. It's structured in a way that makes it easy to measure the return on the state's investment in terms of jobs, payroll and other spending generated, and its five-year lifespan prevents it from remaining on the books indefinitely without further review by lawmakers.

Three bills pending in the Legislature would bring that sort of discipline to other state tax subsidies. One, AB 2666, would require the state to disclose the tax credits received by publicly traded companies. A second, SB 1272, would require future tax breaks to expire in seven years and include benchmarks that could be used to evaluate their effectiveness. A third, SB 1391, would apply an even tougher standard to future tax breaks that are designed to boost employment: If a business cut its workforce within five years of receiving a tax break for adding workers, it would have to pay back some or all of the tax break. Such measures would help bring some badly needed transparency and rigor to state tax policy.