Walters: Are state's tax loopholes, rebates good business or questionable kickbacks?

"When Gov. Gavin Newsom and legislative leaders were negotiating a final state budget last June, they reduced some health and welfare programs to help close a multi-billion-dollar gap between income and outgo. Nevertheless, they agreed to more than double the state's subsidy to Southern California's film and video industry, which enjoys strong political clout, by setting aside $750 million for tax credits, to induce producers to shoot in California rather than in some other state or country."

"Not to be the cheapest place to do business that's never been California's brand or motto going back a century. We want to be the best place. The film and video subsidy is only one way that California's state and local governments steer money into favored economic sectors or even specific corporations. There are dozens of tax expenditures in the state's tax systems so many that the state Department of Finance annually publishes a report on who gets them and how much they cost."

"While the budget expands Hollywood's new tax subsidy, it also tightens up the calculation of corporate income taxes paid by the banking industry. In effect it's raising taxes on one sector to indirectly pay for lowering them on another. Overall, California's tax expenditures reduce revenues by more than $100 billion a year, roughly equivalent to 50% of the state's general fund budget."

State leaders cut some health and welfare programs to close a multibillion-dollar budget gap while increasing film and video subsidies to $750 million in tax credits to keep productions in California. The state presented competitiveness and maintaining California's film-industry stature as rationale for the subsidy. California uses numerous targeted tax expenditures to steer money toward favored sectors and corporations, with the Department of Finance documenting recipients and costs annually. The budget tightened corporate income tax calculations for banks, effectively raising taxes on one sector to offset reductions for another. Total tax expenditures exceed $100 billion annually, about half the general fund.

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