ALBANY, N.Y. (NEXSTAR) —
The New York State Senate held a joint hearing on November 20 about returns on investment (ROI) from tax incentives. The Chairs of three standing committees convened to discuss whether companies operate in New York because the state subsidizes industries to the tune of $11 billion, or if they’d continue doing business here even without that money.
Economic Impact of Tax Incentive Programs
Much of the testimony and questioning in the hearing concerned a December 2023 report from the independent consulting group PFM for the New York State Department of Taxation and Finance titled "Economic Impact of Tax Incentive Programs." It’s available for you to read at the bottom of this story.
As outlined in PFM’s analysis, state tax incentives represent an investment that should boost the local economy and cut costs for businesses. Analyzing different ROIs, critics question whether current subsidies serve that purpose. Do they favor certain businesses, an age-old practice called "picking winners and losers"? After all, watchdog groups point to studies showing that many businesses would or have already come to New York without any incentives whatsoever.
Film Production
Launched in 2004, the Empire State Film Production Tax Credit has supported 537 projects, contributing $8.7 billion in economic activity. This incentive offers as much as a 30% credit on expenses, plus extra bonuses for shooting in certain places. New York also raised its tax credit cap from $420 million to $700 million in 2024.
The credit created over 142,600 jobs from 2018 to 2022, generating $16.3 billion in wages. Workers in the sector averaged almost $150,000 per year. But it also generated $2.27 billion in state and local taxes between those years, falling short of its $3.1 billion price tag. For every dollar spent, New York recovered just $0.15 directly—via tax revenue—and $0.31 indirectly, according to PFM’s report.
Film Post-Production
New York’s Film Post-Production Tax Credit, also designed to attract film companies and create jobs, also failed to generate positive returns, according to the report. Allocating $7 million when established in 2010, the credit ballooned to $45 million as of 2024.
From 2018 to 2022, New York issued $112 million in post-production credits. The ROI doesn’t square well with the $33.9 million in total tax revenue it generated. All told, it made just $0.14 in state taxes and $0.30 in total taxes for every dollar spent. It supported 5,040 specialized jobs in those years, with wages well above state averages. But that growth in pay for workers didn’t keep up with the rising cost of the credits.
Commercial Production
Introduced in 2007 and expiring in 2029, New York’s Commercial Production Credit pays out as much as $7 million yearly in refundable credits to lure productions that film advertisements, creating jobs and supporting local businesses in the process. Productions downstate can get 20% back from the state on eligible expenses, while upstate projects can get 30%. Companies have to spend at least 75% of their production costs in-state, with minimums of $500,000 downstate and $100,000 upstate.
From 2017 to 2021, the state spent $17 million on the program, creating 2,500 jobs whose wages totaled about $285 million. Despite the economic activity, according to PFM, the program generated $7.9 million in direct tax revenue.
Musical and Theatrical Production
The Empire State Musical and Theatrical Production Tax Credit generated only $0.02 in direct tax revenue and $0.06 in total tax revenue for every dollar from 2017 to 2021. It paid for about 360 jobs across the state.
Launched in 2015, it offers a 25% refundable credit to productions that perform in venues with at least 1,000 seats and make at least three tour stops upstate. The state earmarks $8 million for it every year, with no more than 10 claims in a year.
Testimony
Hope Knight from Empire State Development responded to the criticism by backing a different accounting method that showed an ROI of $24 in economic output for every public dollar spent. And coalition of New York-based multicultural filmmakers, producers, and civil rights groups also highlighted that figure in written testimony. They added that, in a survey of New Yorkers, 84% want stories about New York to be filmed here.
Brian O’Leary, describing the Motion Picture Association (MPA), testified at the joint hearing to rebut the PFM report. He argued that its numbers came from faulty data, bad assumptions, and outdated studies. O’Leary cited findings—from Ernst & Young, Regional Economic Models, Inc., and NYU economists—showing an added $10.5 billion in direct spending in 2021-2022 alone.
Conclusion
The debate surrounding New York’s entertainment tax credits has sparked a heated discussion about the effectiveness of these incentives. While supporters argue that they keep New York competitive and create jobs, critics question whether they favor certain businesses and generate positive returns. The PFM report highlights the need for a more nuanced approach to evaluating the ROI of these credits.
FAQs
Q: What is the purpose of New York’s entertainment tax credits?
A: The purpose is to attract film, television, and live theatre productions to New York, creating jobs and stimulating economic activity.
Q: How much does New York spend on entertainment tax credits?
A: The state spends around $11 billion on these credits annually.
Q: What is the ROI of New York’s entertainment tax credits?
A: According to the PFM report, the ROI varies depending on the type of credit. For film production, it’s around $0.15 in state taxes and $0.31 in total taxes for every dollar spent. For film post-production, it’s around $0.14 in state taxes and $0.30 in total taxes for every dollar spent.
Q: Do New York’s entertainment tax credits create jobs?
A: Yes, they do. According to the PFM report, the film production credit created over 142,600 jobs from 2018 to 2022, generating $16.3 billion in wages.
Q: Are New York’s entertainment tax credits effective?
A: The effectiveness of these credits is a topic of debate. While supporters argue that they create jobs and stimulate economic activity, critics question whether they favor certain businesses and generate positive returns.
Download the PFM Report
economic-impact-of-tax-incentive-programsDownload
