Newsom proposes major Hollywood tax credit expansion amid $12 Billion budget deficit

Los Angeles, California – Facing a projected $12 billion budget shortfall, Gov. Gavin Newsom has proposed deep cuts to California’s healthcare services and public universities — while simultaneously pitching a significant expansion of tax incentives for the film and television industry.

Newsom doubled down Wednesday on a controversial plan to boost annual funding for California’s film and TV tax credits from $330 million to as much as $750 million. The credits, first introduced in 2009, aim to keep production in California amid mounting competition from other states and countries.

“It’s on life support,” Newsom said of the state’s film industry. “We need to step things up. This is all part and parcel of economic recovery and growth.”

The expanded credit would raise caps for applicants, extend eligibility to animated and live-action series, and offer greater support for independent productions. Newsom also hinted at collaboration with former President Donald Trump on a potential $7.5 billion federal tax credit to discourage overseas filming.

However, lawmakers from both parties have expressed skepticism. “I’m not sure the rest of California will be OK with their senior programs, their disability programs, their education programs being cut in order to prop up a regional industry,” said Assemblymember Corey Jackson (D-Moreno Valley). Assembly Republican Leader James Gallagher called the proposal “tone-deaf.”

Critics argue the move risks a “race to the bottom” among states offering incentives. Others worry it will be seen as a Hollywood handout at a time when average Californians are being asked to sacrifice. “The ads kind of make themselves,” said Sacramento State political science professor Kim Nalder, referencing Newsom’s rumored presidential ambitions.

Yet the proposal has found momentum in the Legislature, largely backed by labor unions and entertainment workers. The California State Council of Laborers alone has donated $6.5 million to lawmakers since 2015. Walt Disney has contributed nearly $750,000.

Supporters cite a 2023 study commissioned by the Motion Picture Association claiming the program generates $1.07 in state and local tax revenue for every dollar spent — and fuels $24.40 in economic activity. But independent researchers remain unconvinced.

“There is scant evidence that these subsidies boost state economies,” said USC professor Michael Thom, who urged lawmakers to reconsider.

Even Newsom’s allies warn of diminishing returns. “It is doubtful that the amount of money the state gives to this industry proves to be something that we get back,” said former Assemblymember Mike Gatto, who previously supported expanding the credits.

As California lawmakers weigh painful cuts to essential services, Newsom’s bet on Hollywood may test both fiscal prudence and political optics — especially for a governor with national ambitions.