Thursday, August 16, 2012

Bad Times

... On the live-action side.

... Just two of the 23 new fall and midseason shows will be shot in Los Angeles County, as cost-conscious producers seek tax-friendly production havens in New York, North Carolina, Georgia and other states. ...

I had recent occasion to talk to a couple of live-action union reps. They clued me:

"The mood of members is pretty terrible. They're angry. There's just not a lot of high-end work. Features have gone to states with big tax rebates. High end television shows are now doing the same. ..."

"Members can scramble around and get work, but it's work on reality shows. It's shorter-term stuff. They have to work their asses off and the money's not as good, so people are ticked off. ...

As the Times' article points out, when the big-ticket productions go away, workers suffer, suppliers suffer (and go out of business), and the whole movie-making infrastructure slowly implodes.

In Animationland, run-away production has been a sad, sorry fact of life for forty years. Production for animated television shows started departing the early seventies. And bits and pieces of feature production have been outsourced since the eighties.

Just today, a Disney CG artist said to me that he didn't think SCI pre-production for t.v. will stay in Southern California for much longer. "Producers will figure out they can do it India way cheaper," he said.

I'm not completely sure of this. I've watched different slices of animated productions leave and come back to the California southland any number of times. Even t.v. animation isn't always outsourced. Cartoon Network animated a big part of Foster's Home for Imaginary Friends was animated in Burbank. Currently Tom and Jerry episodics are being animated in Glendale.

What has kept a lot of animation development -- not to mention animation -- in California is the depth and breadth of the talent pool. As I mentioned to an animator at Disney Feature this afternoon, it's not enough for foreign sub-contractors to be cheap. They have to be high-quality and reliable, too. Because it does an American conglomerate no good to save a million bucks while missing a release date. Far better to spend the extra million and hit the release date.


Anonymous said...

Riddle me this, Mr. H.;
When all of these hypocritical Hollywood Libs keep voting for Democrats and their higher taxes and then conduct business out of state, what's the incentive to prevent them from moving all of their business out of California? India is cheaper and if you've seen some of the work they've contributed to Democratic campaign contributor Jeffrey Katzenberg's productions you know they are capable of excellence.
I'm currently employed at a major Guild shop that you visited the other day which farms out a significant amount of it's design work to another continent, despite a surplus of available local artists. The conglomerates can spend an extra half billion on foreigners if they need to in order to hit the release date.

Steve Hulett said...

What higher taxes are you talking about, Lefty?

I've been paying taxes for forty years, and these last ten or twelve, they have been as low as they've ever been.

I keep hearing the Right yell about "Obama's higher taxes," and I haven't seen them. (Maybe I need new bifocals.)

You'll have to be more specific about which guild shop you work at. Because they ALL send work out: Disney Animation, WB Animation, Dreamworks Animation, Film Roman-Starz, etc.

Outsourcing has been going on in animation since Dick Nixon was President, and ol' Dick has been dead almost twenty years.

A director called me yesterday, complaining about the new phone system at the MPTF clinics. In passing, he said: "If Romney gets in, we're all finished."

This guy is far from a left-winger, but he's no doubt correct: Romney will finish off the unions and make sure that nobody who clips stock coupons for a living ever pays a dime in taxes. And Vice-President Ryan will see to it that his legislation for privatizing Medicare and Social Security become law. (Then he'll go to work on getting his "personhood" bill for one-day-old fetuses passed. Happy Days are here again.)

Barack Obama might not be your cup of tea, but some brews are more bitter than others.

Everything is relative.

Oswald Cox said...

Obama wants to raise taxes substantially on "the rich". And his definition of that would be a couple that brings home $250,000 annually.

Thats not a lot of money here in Los Angeles. In simple arithmetic, thats two people that make $125k a year.

Thats not that much more than an annual salary on some of our unions minimums. Right?

Celshader said...

Thats not that much more than an annual salary on some of our unions minimums. Right?

What union minimum pulls in nearly $125k/year? That sounds like a sweet gig to have.

Anonymous said...

I guess you do need new bifocals Steve, because I never mentioned our beloved Savior In Chief.
The article we're discussing concerns California so that is where I'm focusing at the moment.
Governor Brown is asking Californians to vote for a "temporary" higher sales tax (Prop 30) in the upcoming election.
Off the top of your head do you think that will inspire more production within CA or more exporting? More people to leave CA or more to come ("I can't wait to move to a state where my more of my hard earned dough can be extracted by the State and spent on pointless projects like the train to nowhere!").

Which studio I work at is irrelevant, because as you say they ALL send work out. The Guild's job at fighting that speaks for itself.

Oswald is correct. A decent storyboarding gig can land you in the $125,000.00 + annual salary range. A directing gig even more.
And if it's at DreamWorks or Disney, it's definitely Happy Days, unless you're one of the babies that Steve would rather see killed.

njen said...

Oswald, you do realise that only 2% of households in the country earn more than $250,000 annually, right?

I'd guess the other 98% would label that minority as "rich".

Anonymous said...

I don't know where you live njen, but in CA a household of 2 working adults, 2 children, a mortgage, car and insurance payments earning $250,000 a year is not "rich".

njen said...

That is your opinion Lefty, and I respect that. My opinion is that earning more than $250,000 annually is rich, and I would guess that the other 98% of the population would agree with that.

Anonymous said...

It's not just my opinion, njen, it's my experience. Who do you think is "richer", the single, childless renter with an annual income of $250,000 living in Bozeman, Montana, or the family of 4 with the same income living in Los Angeles? It's all relative, and where I live (LA), it ain't rich. Jeffrey Katzenberg is rich, not me.

Steven Gordon said...

Not sure where you're getting your info (or experience), but the average income in SoCal is a lot less than 250k - even for double income families. That also currently includes most in our industry.
If you are making over 250k then congratulations, but I know with even my director's salary and a LOT of freelance I don't come close to that.

Steven Gordon said...

And, I should add, that when I was making over 250k during the higher tax times of the Clinton era, I was feeling very well off as did most others in our industry.

Oswald Cox said...

Six figures is a mediocre salary in a major city today. Don't believe me? Look at the figures:

So we have a President aiming to raise taxes on people who are NOT rich. Not good. I'm all for raising taxes on the rich, but two people that clear a six figure salary in Los Angeles do not need the burden of more taxes. Nor do they deserve it.

This president is raising taxes on the middle class in NYC, LA, Chicago, Boston and all other major metropolitan areas. And those are the areas that people are flocking to.

Steve Hulett said...

Lefty? Oswald? A few thoughts.

I've done this union rep job a few years now, and let me educate you about who makes what.

Very few people in the biz make over $250,000 per year. Even fewer are full-time double wage earners.

My wife and I have worked in the business since the seventies. I'm full-time, she's part-time because that's the reality of the business. Few work twelve months a year.

This year, for the first time in years, the two of us will hit $180k in gross income. (My salary is public information.) That places us in the top 5% of total wage earners.

But let's say you're one of the fortunate few who earns, say, $290,000 in animation. If Obama's horrid marginal rates go through, that means:

1) You will pay the BUSH RATES on $001 to $250,000

2) You will pay 39.5% (extra 4.5%) on $250,001 to $290,000.

Big fucking whoop.

Steve Hulett said...

I guess you do need new bifocals Steve, because I never mentioned our beloved Savior In Chief.

You're right. You didn't You mentioned Obama's Hollywood bundler in chief, J. Katzenberg. And I just assumed ...

As to your remark about me wanting to kill babies? Uh, no. I'm against infanticide.

I'm also against abortion. But I'm more against the State telling women what medical procedures they can participate in. (An out of control libertarian, that's me.)

Paul Ryan sponsored a House bill giving personhood to fetuses. Didn't pass, but he gave it the old college try. When Ryan is Veep, he'll have more leverage, and where will a Federal personhood law lead us? Investigating and arresting women who have miscarriages? (Negligent homicide, right?) Banning in vitro fertilization? (Plain old homicide.)

Think about it.

Anonymous said...

Steve(s), please read more carefully. Oswald and I were both referring to 2 incomes combned to total $250,000 annualy.
Now Mr. H., please stop dodging and answer my question. Do you believe that the passage of Prop 30 will inspire more jobs to be exported from CA or attract more residents?

Oswald Cox said...

Who whoa whoa.

So you're admitting that a household with TWO incomes that combines to amount to over $250,000....

Will pay 40% in Federal incomes tax?

•Plus state taxes, which are the 4th highest in the nation...

•Plus the nearly 11% sales tax here in LA County...

•The second highest gasoline tax in the nation...

•And no bargain for property taxes either (14th highest in the nation)...

You're telling me that the taxes in this country are a deal? The "lowest you've paid in 40 years"? Pardon my expression, but you ass is sucking swamp water on that one. More specifically, you are arguing against basic math - which is what liberal and pro union democrats continue to do about the tax liability this state has accrued with the public worker pension system.

We are $27 billion in debt because of unions extorting the politicians in Sacramento into ripping off the taxpayers for sweetheart deals that no one voted for.

njen said...

Lefty, you are trying to convince someone whose household income is less than $100,000 in a city with a higher cost of living than LA, with a couple of kids, a mortgage, car and insurance that having an extra $160,000 to kick around is not being rich...good luck with that buddy.

Anonymous said...

njen, what argument will you use to convince a LA family of 4 with an annual income of $60,000 that you are not rich? If you consider $250,000 rich, how do you describe $500,000? $1,000,000?
I hope Mr. H. has an honest reply for me that doesn't invoke any Liberal spin.

Steve Hulett said...

So you're admitting that a household with TWO incomes that combines to amount to over $250,000....

Will pay 40% in Federal incomes tax? ...

Can't read, can you?

You'll pay 39.5% on Adjusted Gross Income over $250,000.

You'll pay the current (Bush) rates under that amount.

This assumes the the Obama administration gets its way.

Simple math and the tax code is beyond you, apparently.

Steve Hulett said...

As for state taxes. CA is a high tax state, but far from highest.

There are 15 states with higher overall taxes.

Adding, Cal Pers Retirement should go back to the 60% pension that was employed priot to 2000. I believe that 90% of salary is too steep, expecially when the state is running deficits.

Celshader said...

Can't read, can you?

In fairness to Lefty and Oswald, few Americans comprehend how our progressive tax system works. My co-workers are always surprised to learn that traditional IRA and 401(k) contributions can lower their tax bracket, because those contributions come from their most highly taxed dollars.

A family earning exactly $250,000/year will never see President Obama's 4.5% tax increase. A family earning $250,001/year might miss the extra 4.5 cents on that one dollar that they earned above $250,000, but I doubt it.

Anonymous said...

Steve H., I'd appreciate your verdict on Prop 30: good for CA business or not?

Steve Hulett said...

Steve H., I'd appreciate your verdict on Prop 30: good for CA business or not?

1) Don't think the proposition will pass.

2) But assuming it does, I think it will have a small, marginal impact on high wage earners moving out of state.

The additional quarter percent in sales tax won't make much difference in economic activity or businesses moving in or out of state.

RE the movie industry: The reason that movie production has moved out of state over the last few years has MUCH more to do with tax rebates offered by Canada and other U.S. states than it does to tax rates in California.

What makes a difference, I think, is that California doesn't offer the kinds of production rebates now offered by British Columbia or New York or Michigan.

Here's an interesting factoid: New York is getting a LOT of television production away from CA because it gives production rebates -- despite the fact that it's got higher overall taxes than California.

British Columbia is another example. It's taking a lot of visual effects and animation work from California -- despite its high taxes -- because of production rebates.

So. High taxes make some small difference, but they are only one factor of many.

Steve Hulett said...

n fairness to Lefty and Oswald, few Americans comprehend how our progressive tax system works. ...

In fairness to me, I thought I explained it clearly up above. But I will take it from another angle:

High marginal tax rates DO NOT equal high ACTUAL tax rates.

Two real-world, historical examples.

1) Ike. During the Eisenhower Administration, the highest marginal tax rate was 90%. (Eisenhower -- the Republican President and War Hero -- insisted on keeping it high to pay down the debt from WWII.)

Despite this, the effective rate (i.e. actual rate) on high wage earners was 40-50%. Why? Because money earned in the lower brackets pays the lower bracket rates.

(That's what "marginal" means, mi amigos.)

2) U.S. Companies. The complaint is often heard that the U.S. corporate tax rate is too high compared to the rest of the world. The rate is now pegged at 35%. But the real rate paid by the half-dozen most profitable U.S. companies?


In both cases above, there are (were) a plethora of tax loopholes, which bring down actual rates.

Ronald Reagan addressed this in his tax overhaul of 1986, which reduced tax rates and closed loopholes. Top rate then was 28%, and all income was taxed the same.

This overhaul lasted all of two years, then the loopholes started up again, and the rates changed.

njen said...

Lefty, the fact is that I do consider myself well off. I have no illusions about that. That's why I find it funny when people earning over $250,000 complain about a tax increase.

The line has to be drawn somewhere, and drawing at the top 2% household salary earners is as good a line as any.

Anonymous said...

Gee, njen, I consider myself well off every day I'm able to wake up and take care of my family. I may be "rich" (not to mention grateful) in terms of emotional fulfillment, but not wealthy.

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