Governments love doling out taxpayer cash within the hopes that companies will put money into their respective states. Typically, this takes the type of grants or credit to companies that construct manufacturing vegetation, nevertheless it additionally consists of tax credit for movie and tv manufacturing.
Final yr, New York expanded its already-generous tax credit score for productions that select to movie within the Empire State. However a latest state-funded report discovered that the credit score might do extra hurt than good.
Beforehand, movie and TV productions that filmed in New York may qualify for a 25 % tax break. Then the state finances—handed in Might 2023—elevated the cap from 25 % to 30 %, with a ten % bump for any productions that movie in upstate New York. It additionally allowed manufacturing firms to depend solid and crew salaries for tax credit score reimbursement, as much as $500,000 apiece.
Below the brand new proposal, then, a film that selected to movie in Buffalo may get a 40 % tax break on manufacturing and salaries—credit which can be additionally totally refundable, which means a manufacturing may find yourself getting a verify from the state as an alternative of owing any taxes.
With the expanded credit score, the state elevated its movie credit score finances from $420 million to $700 million per yr.
Final yr, the state contracted with PFM Group Consulting to conduct an audit of New York’s movie tax credit score, as is required beneath state legislation for any “tax credit, tax deduction, and tax incentive…which relates to increasing economic development.” The report, accomplished in December, was printed on the state Division of Taxation and Finance’s web site with seemingly little fanfare: It’s not talked about on the location’s record of press releases or on the “News” part of Gov. Kathy Hochul’s state web site.
Maybe there is a purpose for that, because the report is scathing. PFM discovered that the credit score “is at best a break-even proposition and more likely a net cost” for the state. Somewhat than a profitable monetary funding, the credit score “does not provide a positive return to the state in terms of direct state taxes revenues, with $0.15 in direct tax revenue and $0.31 for all combined state tax revenue for every $1.00 invested.”
In response to questions from Crain’s New York Enterprise, a spokesman for Hochul pointed to different state-funded audits that had reached extra constructive outcomes—although one examine, commissioned by the Empire State Growth Company, discovered that whereas state and native governments acquired $1.70 for each greenback invested in 2021 and 2022, the state authorities by itself really misplaced cash over that interval, receiving solely $0.60 for each greenback spent on the movie tax credit score.
Whereas disappointing for proponents of New York’s movie trade, the outcomes should not be shocking. When the state expanded this system final yr, a proponent informed Buffalo’s WGRZ that the additional money would “allow us to compete with other states like Georgia and New Jersey who we have been losing films to consistently throughout the past couple of years.”
However auditors discovered that Georgia solely generates $0.19 for each greenback spent on its tax credit, which works out to a $160,000 taxpayer loss for every job the credit score creates.
Somewhat than increasing the tax credit, New York ought to scrap them altogether. “It is highly likely, given the existing workforce and infrastructure, that much of the economic activity would occur in [New York State] regardless of the credit,” the PFM report discovered. And whereas each New York Metropolis and the state “benefit from exposure in film and television,” “it is likely that much of the exposure would exist because of its prominence in U.S. culture.”
