Waste of the Day: NY’s $700 Million Film Credit a 'Net Cost' To State
Topline: New York State’s subsidies for film producers cost $700 million last year but didn’t boost revenue nearly enough to cover their cost, according to a review commissioned by the state’s Department of Taxation and Finance.
Key facts: The Empire State Film Production Tax Credit pays for 30% of the costs of movies and TV shows filmed in New York, theoretically encouraging producers to create jobs in the state. It’s one of the largest industry-specific tax credits in America.
The subsidy has cost taxpayers almost $7 billion in the last 20 years, and a recent increase means it will cost an estimated $7.7 billion in the next 10 years.
It’s supposed to pay for itself by boosting revenue and collecting income tax on film producers. But the credit is actually generating only 31 cents of tax revenue for every dollar spent, according to the new study.
PFM Group Consulting, which authored the study, wrote that “Based on an objective weighing of the costs and benefits, the film production credit is at best a break-even proposition and more likely a net cost to NYS.”
The credits are “fully refundable,” making them “effectively the same as a grant” since producers can get the money even if they’re not paying taxes to the state.
Proponents of the tax credit argue that without it, film producers would leave for other subsidized states such as New Jersey and Georgia, as well as Canada. The PFM study does not offer a direct stance on this opinion, but its authors wrote that “It’s also quite likely that a lot of activity would occur in this industry in [New York] with or without the incentives.”
Background: The film tax credit used to cost $420 million per year, until a bill backed by Gov. Kathy Hochul expanded it by 70% last year.
Notable payouts have included a $15.7 million subsidy for the “John Wick” franchise and $14 million for the TV series “Unbreakable Kimmy Schmidt,” per the New York Times.
Supporting quote: In an October statement, Hochul wrote that the film tax credit “has generated over $20 billion in spending and created 57,300 direct and indirect jobs in the Empire State.”
Critical quote: “PFM’s findings are likely to be ignored by the Hochul administration and the Legislature’s Democratic supermajorities,” E.J. McMahon of the Empire Center for Public Policy wrote.
“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. The film credit’s cheerleaders aren’t just a reliable source of big campaign contributions — they can even arrange for a governor to receive a special Emmy Award,” referring to the award that former Gov. Andrew Cuomo won in 2020 for his televised press conferences during the pandemic.
Summary: The Empire State Film Production Tax Credit exists to boost revenue and create jobs for New York, not just to help movies get made. If it isn’t accomplishing that goal, it’s nothing more than the world’s most expensive Netflix subscription.
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