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Virginia Gov. McDonnell Drops Income Tax Increase; Seeks Increase for Film Promotion and Business Subsidies

1 min readBy: Joseph Bishop-Henchman

Virginia Gov. Bob McDonnell, who took office last month, has proposed a series of mid-year budget cuts (PDF) to help reduce the gap between the state’s projected revenues and planned expenses. As part of the package, McDonnell dropped his predecessor’s proposal to authorize a local income taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. to replace revenue lost from a car tax subsidy reduction. Democrats are strategizing about how to resist the cuts.

One item of interest is that McDonnell asked for a $50 million increase to various economic development and business recruitment initiatives, including a $2 million increase for film production grants and a $12 million increase to the “Governor’s Development Opportunity Fund,” doubling the size of a slush fund that McDonnell characterizes as “deal-closing fund.”

McDonnell asserts that the $2 million increase in film promotion will generate $29 million in revenue and create 226 jobs. My colleague Mark Robyn explains how that claim is absurd, drawing on our larger report on the failure of film incentives specifically and economic development incentives broadly in achieving economic growth and long-term job creation. Another colleague, Bill Ahern, explained earlier this week how silly it is that Virginia thinks it has to bribe companies to draw them out of Maryland and the District of Columbia.

Interestingly, McDonnell’s budget planners put the extra $2 million for Hollywood on the same page (page 24 of the PDF) as a $6 million savings from “Reduce funding for homeless programs.” Not very good on the optics.

Update: A reader points me to this excellent blog post skewering a recent press conference demanding film tax credits for Virginia. Each state seems to have a second-rate/past-their-prime actor or actress to pitch taxpayer help for their profession, and Virginia gets Sissy Spacek.