While it can be difficult to place too much weight on President Donald Trump’s posts to Truth Social or his off-the-cuff remarks to the press, his lengthy message on Monday carried significant implications for the entertainment industry.
“I am going to suggest that Republicans and Democrats get together and immediately craft Legislation to save the Movie, Television, and Entertainment Business in America. Congress should approve, immediately, a Federal Production Incentive to create Entertainment Jobs in America,” Trump wrote on the social media platform.
What made this post noteworthy extends beyond the possibility of stacking tax incentives. Should such a proposal come to fruition, it could help restore film and television production—and the associated employment—to the United States.
Tariffs to Tax Incentives
Over a year ago, President Trump’s protectionist economic agenda extended to the entertainment industry when he posted on Truth Social: “If they’re not willing to make a movie inside the United States, then we should have a tariff on movies that come in. And not only that, governments are actually giving big money. They’re supporting them financially. That’s sort of a threat to our country in a sense.”
The President raised a legitimate concern: the United States has been losing productions at an alarming rate compared to other nations, largely because foreign governments offer substantial tax incentives and rebates to attract filmmakers. However, Trump’s proposed solution—a “100 percent tariff on any and all Movies coming into our Country”—was widely viewed as creating a more significant problem than the one it aimed to address.
Regardless of one’s perspective on Trump’s tariff policies, applying tariffs to movies presents practical difficulties. Films are not steel or wine—specific imported commodities that are straightforward to tax. As previously noted, “Trump can place a tariff on a pair of scissors, but he can’t touch the haircut.”
Filmmaking functions more as a service—the haircut in this analogy—and the questions of how, on what, and at what stage to apply a tariff to a movie or television production remain impossible to resolve. Implementing such a policy, regardless of how carefully it was drafted, would likely bring Hollywood’s operations to a standstill without addressing the underlying issue.
Within Hollywood, there was hope that Trump’s focus would shift from tariffs to tax incentives, which have proven effective at retaining domestic production.
As discussed at this year’s Cannes panel on “Made In California,” there was optimism that this message had begun to resonate with Trump’s special ambassadors to Hollywood—actors Jon Voight, Mel Gibson, and Sylvester Stallone—with support from the Motion Picture Association, industry unions, and executives including Netflix’s Ted Sarandos and Paramount’s David Ellison, whom the President views as an ally.
Trump’s remarks on Monday represented the first clear indication that this shift had occurred. The following day, Trump named his pending legislation the “Motion Picture, Television, and Entertainment Revitalization Act,” and reports suggest it may be introduced as a bipartisan measure.
Politically, Democrats, led by California Senator Adam Schiff—who drafted legislation for a 15 percent federal tax incentive—have been more supportive of federal intervention to assist the film and television industry than Republicans. The President’s potential ability to bring Republicans on board makes a rare bipartisan bill a genuine possibility.
The States’ Burden
Currently, the responsibility for preserving domestic production jobs through tax incentives has fallen entirely on the states.
As reported, New York City has become the first major U.S. production hub to see the number of film and television shoots approach pre-COVID and strike levels. The reason is straightforward: Governor Kathy Hochul increased the state’s already generous 30 percent return on qualified below-the-line expenses, committing to raise New York’s annual spending from $420 million to $800 million over the next decade.
Advocates argue that this additional $360 million annually—$3.6 billion over the bill’s duration—represents an investment that pays for itself through job creation, spending, tax revenue, and marketing. However, when weighed against spending priorities such as education, increasing subsidies for major corporations like Netflix, Apple, Amazon, and Disney by tens of millions of dollars annually can be a difficult case to make to voters.
When these incentives begin covering above-the-line costs, including the eight-figure salaries of top stars, the political challenge becomes even greater. Subsidizing talent like Tom Cruise is not typically viewed as an effort to preserve middle-class employment in grip or focus pulling positions. This dynamic partly explains why states like California have struggled to maintain competitive incentives compared to international alternatives.
Stackable
A federal tax incentive would establish a new foundation for U.S. productions to stack incentives. Canada demonstrates this concept effectively. For example, considering qualified production expenses for filming in British Columbia, the province offers a generous 36 percent tax credit (compared to Ontario’s 21.5 percent), which can be stacked with Canada’s federal incentive of 16 percent on labor costs. According to Entertainment Partners, the industry standard for analyzing such figures, this provides productions with a combined incentive rate of 46.2 percent. Combined with the favorable USD-to-CAD exchange rate, this creates a triple advantage that U.S. cities cannot match.
Depending on how prospective federal tax incentive legislation is structured, this stacking capability could significantly boost U.S. production, as even a 10 percent federal program—reports suggest it could reach 15 to 20 percent—would amplify the generous incentives offered by states.
Stacking becomes even more attractive if additional production hubs follow San Francisco’s lead and introduce municipal incentives. In February, Mayor Daniel Lurie signed legislation providing a 10 percent rebate on spending up to $1 million and a 20 percent rebate on amounts exceeding $1 million, for productions that shoot 55 to 65 percent of principal photography in the San Francisco area. The legislation also reduced city fees for permits, police services, and filming on city-owned property or buildings.
City plus state plus federal incentives would give certain U.S. cities their own formidable triple advantage.
Labor Uplifts: Additional Stacking
One concern that has become particularly troubling for U.S. filmmakers is not merely that productions have moved overseas, but that other countries have developed the infrastructure and expertise that once gave Los Angeles, New York, and other major U.S. production centers a distinct competitive edge. Nations have achieved this partly by offering additional incentives for labor costs in specific industry sectors they sought to develop.
Canada again provides a relevant example through its DAVE (Digital Animation, Visual Effects and Post-Production) tax credit in British Columbia—a refundable 16 percent corporate income tax credit for qualified local labor costs in these specialized fields. This helps explain why Vancouver has emerged as a hub for visual effects talent that studios rely on.
Just last week, California politicians advocated for a post-production tax credit to address the loss of sound and editing talent and production houses that were once considered the finest globally. Not long ago, even productions filmed abroad typically brought their work “home” to Los Angeles and New York for finishing with the industry’s best artisans and technology companies.
International Co-Productions?
A visit to Cannes makes clear that international co-productions now represent how the majority of films outside the United States are made. This option is not currently available to American productions, which lack the mechanisms, treaties, or federal tax incentive required to participate.
Could federal incentives open the door to another form of incentive stacking? The answer remains unclear, but such a development becomes possible in a future post-Trump administration.
