After the success of The Lady Eve (1941) and a brief foray into more serious territory for the serio-comic Sullivan's Travels (also 1941), Preston Sturges briefly considered reuniting with the latter film's star, Veronica Lake, for a comedy about a modern-day witch. He ultimately passed on that project, which he would later produce as I Married a Witch (1942) with Rene Clair directing. Lake would have been the only leading lady he directed more than once.

Instead, he created an original comedy poking fun at the idle rich. Many of the ideas came from his own experience. As a child, he had ridden trains several times with his mother. On one ride in Europe, their sleeper car was uncoupled and left behind while they were in the dining car, an experience that inspired the train scenes involving the Ale and Quail Club. He also had spent time in Palm Springs as guest of his friend Paris Singer, who had helped develop the area. And his second wife, Eleanor Post Hutton, was an heiress with connections throughout international high society.

Sturges's original title was Is Marriage Necessary?, but the Production Code Administration objected to the way it seemed to make light of marriage. He changed the title to Is That Bad? and sold his original story to Paramount for $10,000.

Sturges planned the male lead for Joel McCrea, with whom he had enjoyed a strong working relationship on Sullivan's Travels. He also wanted a big female star. Originally Carole Lombard was to have played Gerry Jeffers, but her death in a plane crash forced him to choose Claudette Colbert instead. At the time, she commanded $150,000 per picture.

Sturges came up with the character of millionaire J.D. Hackensacker III by accident. He wanted to see the new Ronald Colman film, My Life with Caroline (1941), but arrived at the theatre an hour early. With nothing better to do, he caught the tail end of the second feature, the low-budget musical Time Out for Rhythm (1941), starring Ann Miller. Radio crooner Rudy Vallee was the male lead and though he was primarily straight man for all the film's jokes, every time he opened his mouth the audience roared. Sturges immediately created the role with Vallee in mind. Studio management fought casting the radio star, since his early pictures had been flops, but Sturges persisted. Even with the failed films in his past, Vallee still commanded a high fee because of his success on the radio.

Stage star Ina Claire, who had played Greta Garb's romantic rival in Ninotchka (1939) and was hailed as an expert at light comedy, was considered for the role of the Princess Centimillia. Eventually it went to Mary Astor, who had very little experience in the genre.

The Production Code Administration rejected the script at least twice because it made too light of marriage. They also complained that J.D. Hackensacker III was too similar to John D. Rockefeller. Sturges made numerous line changes and reduced the number of Princess Centimillia's marriages from eight to three, with two annulments.

Just before production began the film was retitled The Palm Beach Story. Sturges was concerned that Is That Bad? provided too much ammunition to the critics.

Paramount gave the film a budget of almost $1 million. This was the highest budget with which Sturges had ever worked. Salaries for the four stars and the many extravagant sets required helped drive the projected costs up.

By Frank Miller