Hollywood Hits the Bailout Trough

This post first appeared on Minyanville.

Even as California teeters on the edge of insolvency, state lawmakers are considering tax breaks aimed at lining the pockets of Hollywood filmmakers.

According to the Wall Street Journal, states like Louisiana, Michigan and Minnesota started offering attractive tax incentives for studios to film within their borders. Feature-film production days in Hollywood hit a 15-year low in 2008.

Now, in an attempt to lure big-name producers and directors back to its sunny shores, California is proposing a 25% tax credit of its own. The proposal would reimburse studios for a portion of their expenses, in the hopes that peripheral spending and job creation will help prop up the state’s flagging economy. Besieged by the housing market collapse, California has one of the nation’s highest unemployment rates at 9.3%.

The new proposal could be funded partially out of California’s allocation from President Obama’s economic stimulus package, although it isn’t likely to put money into the pockets of the country’s most downtrodden. High-profile actors aren’t exactly standing on bread lines just yet.

And while the initiative could provide employment to gaffers and dolly grips throughout Hollywood, critics argue movie shoots rarely generate long-term, sustainable jobs.

Instead, they argue, bloated payments to actors and eye-popping special effects have raised movie budgets beyond reasonable levels. Meanwhile, states vie for filmmaker dollars with ever-more-outsize kickbacks - kickcbacks that simply perpetuate the unsustainable economics of making movies.

Big studios like Disney (DIS), Universal (GE), Columbia (SNE) and Warner Brothers’ (TWX) are smarting as consumers rein in spending on luxuries of all kinds. Movies do offer a semi-affordable entertainment option.

California's attempts to win back the industry it birthed decades ago is further evidence of the private sector's increasing dependence on government handouts for survival. And while tossing a few bucks to filmmakers to generate local jobs may seem like a worthy trade-off in a rough employment environment, it creates a dependency - and perpetuates unsustainable business practices.

It's no wonder movie budgets soared as states upped their kickbacks: Spending someone else's money is a lot easier than spending your own.