There was a time when California and Hollywood were interchangeable, and anyone who wanted a movie career headed west to make it big in L.A. Unfortunately, thanks to bad politics both in Hollywood and Sacramento, the film industry is moving elsewhere for more business-friendly climates.
It means the state is losing billions to states that make it easier to produce movies and television shows, which explains (at least partially) why it's trying to tax billionaires to make up its massive budget deficit.
California losing over $1B to rival states for film, TV production — despite Newsom tax incentives https://t.co/xqn6iY1508 pic.twitter.com/RfDyCIrJ6M
— New York Post (@nypost) January 19, 2026
California’s star is dimming.
The Golden State could be losing more than $1 billion in film and TV production spending to rival states — even after Gov. Gavin Newsom rolled out record tax incentives to keep Hollywood at home.
California saw 20% fewer movie and TV projects filming last year, while spending on those productions fell 22% year-over-year, according to The Hollywood Reporter, citing a report from industry tracker ProdPro for the fourth quarter of 2025.
The decline comes despite California doubling its film and TV tax credit program to $750 million annually.
But states with similar tax breaks to California saw a rise in big and small screen productions.
The shifts suggest the Golden State could lose over $1 billion in production spending to New York, New Jersey and Illinois — even after rolling out its biggest incentive boost yet.
Here's the dirty little secret: despite that $750 million tax credit program, the state of California makes it so expensive and regulatorily burdensome to work there that production companies go elsewhere.
For example, California's wage-hour rules require overtime pay after 8 hours of work and double time after 12 hours, with added union rules surrounding "Golden Hours" provisions (which trigger double time tied to long consecutive hours).
The Film & Television Tax Credit Program 4.0 provides a 20 percent credit to non-indie films and most TV, and a 25 percent credit for indie features and relocating TV. But there's a catch: this is only for "qualified expenditures" and not the entire budget. This includes crew and staff wages, equipment/facility rentals, and in-state production operations. But it doesn't cover many big-ticket items, including distribution.
That means the actual percentage of the budget that qualifies for the tax breaks is more like 8-12 percent.
Union rules dictate not only the aforementioned pay scales, but also meal period pay that could be subject to layers of additional union rules, the "Golden Hours" provisions, rest period rules, and things like permitting fees and monitors.
California throws hundreds of millions in tax breaks at Hollywood, and productions still flee to other states. When you overtax, overregulate, and make it impossible to operate, no amount of incentives can stop the exodus. https://t.co/9vL6SHhg09
— Matthew Newgarden (@a_newgarden) January 19, 2026
When you tax something, you get less of it. California chose to tax businesses, including Hollywood, and now Hollywood is looking for greener pastures.
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