From the Right: Albany’s wasteful tax breaks

From the Right: Albany’s wasteful tax breaks
George Marlin

Since the turn of the century, New York has granted huge tax cuts on in-state movie and TV production—a cause favored by media companies, studio owners, producers and movie labor.

Here’s a list of the tax credit programs which are targeted at the entertainment industry and the year they were enacted:

  • Empire State Film Production Tax Credit (2004)
  • Empire State Film Post – Production Tax Credit (2010)
  • NYS [TV]Commercial Tax Credit (2007)
  • Empire State Musical and Theatrical Tax Credit (2015)
  • NYC Musical and Theatrical Tax Credit (2021)

These enormously generous programs have cost taxpayers a whopping $7 billion in subsidies since 2004. In effect, taxpayers have picked up the tab for “30% of qualified production costs for movies and TV shows made in the Empire State.” SOURCE

When the tax credits were first proposed in the state Legislature, advocates argued that Connecticut and Louisiana and other states had lowered taxes on movie production and were stealing business from the Empire State.  Leading Hollywood types explained that while they loved New York State, movie production is a business and they have to focus on the bottom line.

The question now is: Are taxpayers getting a return on these giveaways to the entertainment industry?

Well, the good news is Section 108, Article 8, of the New York State Tax Law requires the Department of Taxation and Finance to hire an outside expert to conduct a “comprehensive analysis of each tax credit, tax deduction, and tax incentive under New York tax law that relates to increasing economic development” to determine the effectiveness of these programs

Such a report on the entertainment industry, performed by the investment advisory firm PFM Group, was posted without any fanfare on the Finance and Tax Department website in January.

And taxpayers should be grateful that E.J. McMahon, of the Empire Center think tank in Albany, picked up on the 360-page analysis and revealed its dismal findings.

Here’s a summary of PFM’s study prepared by the Empire Center:

  • The Film Production credit “does not provide a positive return to the state.”
  • “It is highly likely…that much of the economic activity [attributed to the tax credit] would occur without it.”
  • Television and movie production would have happened regardless of the tax breaks because of New York’s “prominence in U.S. culture.”
  • The jobs subsidized by the credit are “high paying” and thus create “enduring value,” but “it is likely that the production credit will never ‘go away’ in the sense of leaving behind a stable, job growth industry absent the credit.”

“Based on objective weighing of the cost and benefits,” PFM concluded, “the film production credit is at best a break-even proposition and more likely a net cost to New York State.”

However, these failed tax breaks, E.J. McMahon warnED,  “are likely to be ignored by the Hochul administration and the Legislature’s Democratic super majorities. The taxpayer giveaway to Hollywood East enjoys strong support from a politically powerful, deep-pocketed constellation of producers, actors, labor unions, and real estate interests enriched by the subsidy.”

In my judgment, the government should abolish such companies’ specific economic subsidy programs and use the cash freed up to lower the cost of doing business in the state for all businesses—cut the corporate income tax, lower the cost of Workers’ Comp and reform the Wicks Law, which prohibits the government from using general contractors and thereby inflating construction costs.

The state should stop trying to guess which industries and companies will be winners and losers; it isn’t good at making those calls. The entertainment industry should make decisions on its own after the government performs its proper role of creating a business environment conducive to investment and job creation and providing the transportation and other infrastructure necessary for the state to compete.

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