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Despite research from the Federal Reserve and others showing that film tax credits hurt the finances of states more than they help, they remain enormously popular.
Jon Campbell writes at the Gothamist about a recent New York study that is skeptical about this kind of tax credit. He also reports that many people just want to believe.
“New York’s $700 million-a-year tax break for film and TV productions isn’t providing taxpayers with a good return on investment, according to a new analysis commissioned by the state itself.
“The state Department of Taxation and Finance quietly released a 359-page report late last month analyzing New York’s major tax incentive programs, which are meant to attract and retain businesses. The analysis, authored by consultant PFM Group, was required by lawmakers two years ago.
“The results show a decidedly mixed bag, with some tax breaks — including the state’s marquee Excelsior Jobs Program — performing well, the report found. But the return for the state’s Film Tax Credit, which Gov. Kathy Hochul and lawmakers boosted by $280 million annually last year, was not nearly as positive.
‘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 the state,’ according to the report.
“For every dollar the state gave in tax breaks from 2018 through 2022, the Film Tax Credit drew an estimated 15 cents in direct tax revenue, the analysis found. …
“The state’s biggest industry-specific tax break belongs to the film industry, which gets $700 million a year to film or do post-production work in the Empire State. Hochul and legislative leaders are big supporters of the program, which has helped lure hundreds of productions over the years.
“The tax break can be considerable. It covers up to 30% of a film’s qualified production costs, with another 10% available if productions are filmed in certain counties north of New York City. The credit is also refundable, meaning the state pays out the excess money if it exceeds a film production’s tax bill. …
“Beyond the lackluster return on investment, PFM’s report surmised that much of the filming that occurred in New York would have happened regardless of the tax credit. … When adding indirect and induced jobs — employees who don’t work directly on production but whose employment stems from it — that return rises to 31 cents. …
“[A] prior state analysis, crafted by Regional Economic Models Inc., estimated the Film Tax Credit generated $1.70 in state and local tax revenue for every dollar the state gave up in 2021 and 2022.
“E.J. McMahon, founder of the Empire Center, a fiscally conservative think tank, argued that the prior analysis was too simplistic and assumed the film industry wouldn’t have created any jobs without the tax breaks. PFM’s analysis, he wrote, was ‘meatier’ and ‘less credulous.’ …
“PFM estimated the Excelsior program has a return of $5.25 in tax revenue for every $1 the state forgoes, when including indirect and induced jobs.
“[State Sen. James Skoufis, a Hudson Valley Democrat who pushed for the new report in the state budget] said the report’s findings on the Film Tax Credit fell in line with his expectations.
“ ‘There are some of us, myself included, that believe that the Film Tax Credit and the associated entertainment tax credits are such a bad deal that they ought to be repealed,’ he said. ‘But the politics is the politics in the state Legislature, and that continues to remain an uphill climb.’ …
“Josh Levin, vice president for state government affairs for the Motion Picture Association’s Northeast Region, said New York’s Film Tax Credit is ‘essential’ for ensuring the state ‘retains its position as a top hub for production activity and union jobs.’ …
“Lawmakers extended the Film Tax Credit for an additional 10 years. It’s scheduled to run through 2034.” More at Gothamist, here.
Maybe constituents’ delight in seeing movies being filmed in their neighborhoods is what motivates lawmakers. In that case, how about accounting for it differently — as a state expense for resident entertainment?





