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February 20, 2014

Lights. Camera. Boondoggle.

How you spend your money reveals what your priorities are. By that measure, Virginia lawmakers would rather help Hollywood movie moguls make a profit than help low-wage working families make ends meets.

A bill passed by the House of Delegates (HB460) and set to be considered by the Senate Finance committee would raise the maximum dollar amount allowed under Virginia’s motion picture tax credit to $12.5 million per year, which amounts to up to $25 million across the state’s two-year budget.

That’s a 400 percent increase.

Currently the credit is limited to $5 million over two years. That’s money that gets drained from the general fund instead of being used for crucial  services like schools, health care, and public safety that boost our overall economy, not just a sliver of it.

No one denies that creating and retaining high-quality jobs is vital to the economic future of the commonwealth. But the idea that dishing out more Hollywood handouts will lead to more stable employment in the commonwealth is pure fiction made for the movies.

The most rigorous studies show that motion picture tax credits aren’t effective generators of economic development. The jobs that they create are temporary and low-paying. In the movie biz, most highly paid, highly skilled workers are brought in from other regions, while low-skilled workers are the ones hired locally and  take home only a fraction of the total wages associated with a project. Because the film industry is highly mobile, those jobs don’t last after a movie wraps.

Given the commonwealth’s central role in the history of our country and our proximity to the nation’s capital, there’s a good chance that many of the movies that will reap these extra benefits would have been filmed here without the bigger handouts. In fact, when the makers of “Evan Almighty” came to Virginia in 2007, they weren’t lured here by the tax credit, according to the head of Virginia’s film office: “No one thought to ask about state incentives until after production began,” she told the Richmond Times Dispatch.

Needlessly giving away tax revenue is bad enough, but when you contrast this victory for Hollywood with the defeat of a bill that would help hard-working Virginians make ends meet for the long haul, it gets even worse. HB1151 would have beefed up Virginia’s earned-income credit (EIC) for working families. It may not have the star quality of a blockbuster script, but the EIC offers real help to real people.

Right now the EIC acts as a temporary support to help low- and moderate-income families reduce the Virginia income taxes they owe. But it can do more to help these families.

Low-income workers in Virginia pay more in state and local taxes as a share of their income than high-income Virginians. HB1151 would have addressed this imbalance by making the EIC refundable, a feature that the motion picture production tax credit already enjoys. As a refundable credit, workers who qualify for the EIC would get a tax refund if their credit is greater than the income tax they owe, just as movie studios get a check from the state if their credit exceeds their state taxes.

But unlike the movie credits, tax credits for working families are proven to produce positive outcomes. They help families climb out of debt, buy necessities, pay their bills on time, and build savings and assets that help keep them from falling behind later. They provide a stepping-stone that helps families get out of poverty and get ahead. 

But  it looks like Virginia lawmakers would rather use precious resources to give movie moguls a Hollywood ending, while an important measure to help low-wage working families in Virginia gets cut out of the script.

–Sara Okos, Policy Director

The Commonwealth Institute

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