As far as flashy movie productions go, Steven Spielberg’s new film Lincoln may have it all—an award-winning cast, big-name director, and the historic locations in Richmond and Petersburg, Virginia to showcase the sprawling tale.
But like a starstruck paramour, Virginia has lavished countless gifts to win the heart of the big-studio production, offering sweet tax deals and sexy film grants to guarantee the state gets a piece of the fairest industry of them all, Hollywood.
“The only reason I can understand why they focus so much on the Hollywood industry is because it’s kind of a sexy industry and the governor gets photo opportunities with movie stars,” said Chris Edwards, director of tax policy studies for the libertarian-leaning Cato Institute. “I think it’s that superficial, which is frankly pathetic.”
The film opens in theaters nationwide on Friday.
Behind the scenes, policy analysts and lawmakers say Lincoln, which received roughly $3.5 million in tax incentives ultimately from taxpayer pockets, offers a glimpse into Virginia’s runaway tax preferential treatment to subjectively selected industries. It’s a practice they say skews the level economic playing field and eats up tax revenue needed elsewhere.
“From my point of view, the state giving $5 million to a billionaire to make his movie in Virginia is a luxury our state can’t afford right now when we are cutting education, Medicaid and the rest of our safety net,” said Virginia Delegate Scott Surovell (D-Fairfax).
But Virginia isn’t alone in this game of film favoritism. More than 40 states now offer tax incentives for filming in-state, creating a complicated and costly arms race, Edwards said.
“I think it’s sort of like a cancer,” he said. “It’s getting worse and worse. The more states have special deals for certain industries, the more other states are induced to the same, and it’s sort of like an arms race within the states that just leads to a more complex tax code.”
The Virginia Film Office was established in 1980 to lure multimillion-dollar projects away from Hollywood and neighboring states.
The business incentives to entice these projects were sweetened in 2010, when Gov. Bob McDonnell signed Virginia’s first film tax credit into law.
Feature films, made-for-TV movies, television shows, documentaries, and even commercials, filmed in Virginia are eligible for tax breaks through the Virginia Motion Picture Tax Credit Program. There is a litany of of tax code voodoo from which the studios can shave off production costs, including The Governor’s Motion Picture Opportunity Fund. It make it easy for big productions like Lincoln to save a buck on their Virginia tax returns.
The theory is that with a healthy film industry, movie production can make an economic splash in the state, hiring skilled workers, actors and extras. The ripple effect spreads to industries that service the production, such as caterers, craftsmen, and others.
“For example, you’ve got the caterers who buy food and hire people to work catering the film,” said Mary Nelson, communications manager for the Virginia Film Office. “The expanded impact then is that the grocer has to go out and purchase food from a distributor, who purchases it from a farmer. The grocer hires people to work in the grocery store and whatever. This is all economic theory, and it means any dollar spent in that community has greater impact than just that dollar.”
That’s what McDonnell spokesman Jeff Caldwell argued, too, saying the Lincoln production had direct expenditures of $32.4 million, for a total economic impact of $64.1 million. The company hired 1,1990 Virginia-based actors and extras and 380 crew members. The production used 23,580 room nights in local hotels and spread business to places like grocery stores, restaurants, hardware stores, and dry cleaners, he said.
“The incentives given to attract this major motion picture to shoot in Richmond were a direct investment in bringing jobs, tourism dollars, and investment into Virginia,” Caldwell wrote in an emailed statement.