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But like summer camp, movie productions are part of a “fly-by-night” industry, eventually coming to an end and taking their millions back to California to prepare for distribution, Cato’s Edwards said.
Surovell said instead of chasing the celebrity culture that follows film productions, Virginia should be investing in long-term economic solutions and revenue growth.
“I also think that to the extent that we do spend money on economic development, it ought to be for projects that support permanent investments in Virginia and not sort of fleeting activities like movie productions,” he said.
But the argued-for economic growth, according to a 2010 paper by the Center on Budget and Policy Priorities, a policy think tank based in Washington, D.C., doesn’t even pay off. The paper claimed the state revenue the films generate falls far short of the cost of tax breaks and subsidies doled out to the productions. The best jobs go to skilled workers imported from the out-of-state studios.
Edwards said the economic argument for film industry tax
incentives is flimsy, and shows the tax code is broken.
“I think that’s a stupid argument they make,” Edwards said. “If they focus on making the overall tax code low and fair and equal, they would attract industry, because industry would know that they could come to Virginia and Virginia would have a competitive and equal and fair tax structure.”
And it’s not like this industry needs any help, said Matt Mitchell, a senior research fellow at the Mercatus Center at George Mason University in Fairfax.
“This is not like spending money on orphans and infants or the elderly,” Mitchell said. “These are pretty well-heeled production companies. It doesn’t make a lot of sense to be raising the tax rates on everybody else in order to pay for basically concessions to well-heeled production companies.”
Virginia’s preferential treatment of the film industry, said Mark Daugherty, chairman of the Federation of Virginia Tea Party Patriots, is just one example of its “fundamentally unfair” tax favoritism, along with breaks for industries like beekeeping and wine. At its worst, it’s nothing better than “crony capitalism,” he said.
In offering preferential treatment to some industries over others, leaders can actually inhibit the growth they hope to create, Edwards said.
“The film incentives are really the poster child for what’s wrong with (tax) incentives,” Edwards said. “Economically, state governments should not be favoring some industries over others. I mean, why should the film industry be favored over some more mundane industry like furniture manufacturing? Virginia needs jobs in unsexy, normal industries like furniture manufacturing as well as fancy or artsy industries like the film industry. And we don’t want politicians choosing which type of industries they think are good for Virginia.”
And the negative effects of preferential treatment only snowball, leading to more lobbying and an arms race among the states for certain industries, said Edwards.
“If state policy makers start buying off certain industries with special deals it’s going to encourage other industries to come forward and say, ‘hey why don’t we get the cool credits like this,’ so it encourages more and more lobbying, and ultimately, that reduces the incentive for overall tax reform,” said Edwards.
This article originally appeared at Watchdog.org.