Push for state film credits from Congress

In July 2014, 28 members of Congress sent a letter to members of the California legislature urging them to pass legislation (AB 1839) to extend California's film credits that expire in 2015. The letter notes some dismal data for the California film and television industry, including:

• 52% of production jobs are in California whereas ten years ago, it was 65%.
• In 1997, 16 of the 25 films with the largest receipts were filmed in California while in 2013, only 2 of the top 25 were filmed in California.

A few observations:

• The federal tax law includes a production incentives (IRC Section 181) that expired 12/31/13. Do the members who wrote the letter support extension or permanence of the federal incentive? After all, California is not just competing with other states for production work, but also with other countries. [Additional information on this incentive from the California Film Commission - here.]
• The California Legislative Analyst's Office (LAO) (and others) question the value of film credits. A report from the LAO issued in April 2014 raises many issues including (5/7/14 LAO blog):

1. "Film and television production in California could decline anyway.
2. Responding to other jurisdictions’ subsidies could be very expensive.
3. Interstate and international competition could stoke a “race to the bottom.”
4. For state government, the film tax credit does not “pay for itself.”
5. Subsidizing one industry sets an awkward precedent.
6. It will be difficult to evaluate the effectiveness of the film tax credit."

• The Tax Foundation has also questioned the value of film credits.  Several states have also issued reports reaching similar conclusions.
• Should members of Congress be urging state lawmakers to do something, particularly something that lowers tax revenues (yes, perhaps revenues increase from the film work, but is it enough (see the LAO report) and what is the harm to other industries that, in effect, are subsidizing another industry?).  Of course, "urging" is not as strong as what Congress is saying to state and local governments about their tax base decisions in other ways. The House passed H.R. 3086 (7/16/14) to make the Internet Tax Freedom Act permanent (it expires 11/1/14). This rule prohibits state and local governments from imposing taxes on Internet access fees.
• What about analyzing the film credit against principles of good tax policy? Certainly, it violates the neutrality principle by affecting decision-making about where to shoot a film. It violates economic efficiency be lowering taxes in one industry which in effect raises them in other industries. And, what about the "race to the bottom" argument of the states competing against each other in how much they can provide to the industry?

What do you think?  What might work better to keep film production in the U.S. and in any particular state?