Should California Subsidize Noah Wyle’s ‘The Pitt’ Pay?

For nearly 20 years, California has drawn a line between subsidizing pay for people in front of the camera and the workforce behind it.

When the state started writing checks to Hollywood in 2009, the thinking was that the purpose of tax credits for films and TV shows would be to create jobs and juice the overall economy. That hasn’t changed through four iterations of the program across three governors. Its refusal to offset a production’s salary for, say, Tom Cruise, has made it an outlier among the 39 states that offer production incentives and is probably the biggest reason why it’s losing its grip as the filming capital of the world.

Now — in a major pivot from its historic position that allowing productions to count so-called “above-the-line” spending toward expenditures for filming subsidies would be irresponsible — California is doing the math. Select lawmakers have come to a not-so-surprising conclusion among industry insiders: the state can no longer afford not to.

“We’re still not competitive,” says Assemblymember Rick Chavez Zbur, a key legislator who has been working with Hollywood proponents to fine-tune the state’s incentive program.

The idiosyncrasy to California’s film and TV tax credit program has been leveraged by competing states and foreign countries to coax productions into leaving. Now, Gov. Gavin Newsom is trying to fight back. On Monday, Newsom announced another major expansion to the program that, if passed, would increase the annual credit from $750 million to $1 billion and allow a portion of pay for actors, directors and producers to qualify, among other changes.

Supporters have been clamoring for these costs to be counted for years, arguing that drastic changes must immediately be implemented to rescue production in California. Despite a record number of titles getting tax credits, production levels in Los Angeles, a barometer of shooting levels in the state, have continued to drop the last two quarters. The region saw a nearly 5 percent decrease in shoot days from June to September compared to the same period last year and an 11 percent drop compared to the previous quarter, according to the latest report from permitting office FilmLA issued last month. The total is 36 percent below the five-year average, highlighting the fierce competition between states and other countries to host Hollywood.

Economists, however, remain skeptical about the value of filming subsidies, particularly whether they generate enough jobs and business activity to justify the cost. The Legislative Analyst’s Office said last year that the tax credits indeed increased production activity but that there’s weak evidence indicating that it benefits the state’s overall economy.

The latest changes announced on Monday could throw more fuel onto the fire of whether taxpayers should be footing the bill for studios, some of which are engaged in major layoffs even as executive compensation remains sky high. Those same studios, it should be noted, have made a choice to go elsewhere, chasing cost savings.

Take the example of the HBO Max hit The Pitt, which actually does shoot in California, on the Warner Bros. lot in Burbank. California is projected to give Parallax TV Productions, whose parent is Warner Bros. Discovery, nearly $49 million in subsidies across the series so far for shooting the show in-state. More than half of that figure will come for the filming of season three, after former Warner Bros. Discovery CEO David Zaslav saw his total pay package soar to $165 million for 2025 and exit the company with more than half a billion dollars from the studio’s merger with Paramount. Additional layoffs are underway at the combined company, which made just 15 movies combined that filmed in the country over the last two years.

While there haven’t been substantive discussions on the issue, Zbur says talks so far have acknowledged that taxpayers shouldn’t be subsidizing compensation for executives or A-listers. He draws a distinction between those two groups and other talent, several of whom he says are “barely getting by and only make family-supporting incomes.” It’s unclear how legislation could be drafted to account for that distinction, though something like a hard cap on individual salaries could be feasible.

“There’s been some amount of consensus that we don’t want to allow tax credits for studio executives who are making a lot of money or star actors,” Zbur says.

For years, New York, like California, had reservations about subsidies for above-the-line expenditures. But in a major expansion of the program last year, it eliminated a $500,000 cap on those costs. It’s a significant reason why California is poised to lose its title as the filming capital of the world, with New York drawing big-name titles at a much faster pace, according to industry tracker ProdPro’s latest quarterly snapshot, which noted that the state saw a 87 percent increase in production spend in the quarter compared with California’s 17 percent uptick.

For California, the change is mainly aimed at drawing big-budget TV shows back to the state, where production in the category is roughly half below historical norms. Across its run, TV titles can accumulate substantial above-the-line costs since they employ a recurring cast, multiple writers, showrunners and producers in a single season.

“The competitive reality is clear,” says Stephen G. Weizenecker, a partner at Barnes & Thornburg who handles tax incentives and financing for productions. “States trying to maximize production spending have included above-the-line costs to win the biggest films and television series. By excluding these costs, California has effectively been offering a smaller credit on the productions that it most wants to keep.”

Still, questions will inevitably be asked about whether California taxpayers are on the losing side of the bargain. Hawaii in 2024 issued 32 productions $38 million in tax credits, according to a state economic report. Those titles paid $112 million in total wages, the report said, with above-the-line pay accounting for roughly $36.3 million. But just $11.7 million of that went to Hawaii residents; the remaining $24.6 million went to workers outside the state. The figures suggest that expanding tax credit eligibility to cover talent compensation could direct a substantial share of subsidies toward talent who don’t live in the state, raising questions about how much of that spending ultimately benefits the local economy.

A major talking point will likely also revolve around California helping pay star salaries for productions that would’ve shot here regardless of the change. Take The Pitt again: If the series was already going to film in California for future seasons, the state will effectively be subsidizing an expense that didn’t influence the production’s location decision. The show already saw the size of its credit nearly double for the third season. Now, it’s probably in line to get even more.

And with Newsom leaving office in the new year, it’s an open question on whether his successor in Sacramento will have the same enthusiasm for supercharging the state’s Hollywood tax credit. Democratic gubernatorial candidate Xavier Becerra has been cautious and specific about how he would deploy tax credits if elected. He’s favored expansion based on an “ongoing assessment of where we are losing work: post-production and VFX, independent productions, episodic television at scale, and whatever gaps the data reveals” — in other words, he wants to increase the tax credit, but carefully, and based on specific data. Meanwhile, he has not mentioned above-the-line costs. The Hollywood Reporter has reached out to a spokesperson for Becerra on Newsom’s announcement.

His rival, Republican Steve Hilton, on the other hand, clearly wants a major tax credit boost. In a move that’s even more aggressive than Newsom’s, he’s called for California to uncap its Hollywood tax credit entirely and include above-the-line costs as eligible expenses. (But, it’s worth noting, as of this writing, Hilton lags behind Becerra in several polls.)

Regardless of which candidate wins the governorship, such legislation would face difficult questions in Sacramento, especially at a time when the state is still reeling from federal funding cuts. The optics of including above-the-line costs in a $1 billion annual tax credit fund during a period of serious affordability concerns would be, to say the least, tricky. Any legislators carrying such a bill would need to convince their colleagues in multiple parts of the state where Hollywood has less sway of the wisdom of such a move.

But it’s clear that something needs to change to bring production back to Hollywood’s historic home. Could including above-the-line costs in incentives lure sets back? While not being able to do so previously is one of a much larger patchwork of complaints that producers tend to reel off about shooting in L.A., supporters seem to be suggesting that at this point it’s worth trying anything feasible to curb the flight of production.

“We’ve made important progress but we can’t rest on our laurels,” Zbur says. “We need to continue focusing on the tax credit program to make sure we’re truly competitive.”