What movie is the biggest flop of all time? Ishtar, Heaven’s Gate or for you younger Bennifer fans, Gigli – all big budget disasters. They’re fun to talk about and even debate, when it’s not your money! Unfortunately, over the past 20 years New York taxpayers have been on the hook for financing more and more movies and television series in the name of “jobs” – many Teamster jobs – to the tune of almost $7 billion dollars. Now, Governor Hochul has proposed to spend even more.

In her Executive Budget, Governor Hochul has proposed to dramatically expand New York’s film tax credit by over 60% to a whopping $700 million annually. Established in 2004, I know because I helped to create the program, it has grown from an annual appropriation of $25 million to a massive $420 million today. With so much need around the state, does a $700 million handout to the entertainment industry make sense?

On one hand, New York is a tax and regulatory hell and almost every business sector can make a compelling case that in order to compete effectively, state assistance is needed. But why this industry as opposed to others? How does it work? Why this much? 

Here are five things that you need to know about the film tax credit.

  1. The film tax credit is refundable, which means once a production has gone beyond its tax liability the state actually sends a check for the balance of the credit. The vast majority of tax credits doled out by states and the federal government are not refundable, which means this tax credit actually costs taxpayers real money. When Albany talks about what it can afford and can’t afford, remember while it’s called a tax credit, $700 million in real $$$ are planned to support film and television series.
  1. The administration’s proposal, for the very first time since the inception of the program, would make what are known as above the line costs, the salaries of actors, directors and writers, eligible for taxpayer funding.  That’s right, under the Governor’s plan taxpayers will now be on the hook to help pay the salaries of Tom Cruise, Gwenyth Paltrow, Alec Baldwin, Rosie O’Donnell, Steven Speilberg, Aaron Sorkin etc. As much as I love Blue Bloods and Tom Selleck, and deep down wish Frank Reagan was actually running New York City, we don’t need to pay his salary.
  1. It was once said to me that politics is show business for ugly people. Think about what so many actors and politicians have in common – the ego, the narcissism, the performance and self promotion. George Santos is the personification of the thin line between reality and fiction. At the very least, it seems most every politician, upstate and down, has been bamboozled by the bright lights, craft services table (free food) and other trappings of a movie set. Speaker Heastie himself recently endorsed the effectiveness of the program, just after sitting in the director’s chair on the set of the Equalizer.  Now, notwithstanding the fact that after Tom Selleck, Queen Latifah’s badass Robin McCall, is the next person I wish was running New York City, it would take more than a few minutes with the Queen to convince me this level of spending is a good deal for New Yorkers.
  1. Disagreement about effectiveness Like most every economic development program, there is vast disagreement about the effectiveness of film tax credits. In New York, organizations such as the Citizens Budget Commission, the Empire Center and Reinvent Albany have rallied against the credit as excessive. A 2019 study by the University of California analyzed the five largest state motion picture incentive programs — in New York, Louisiana, Georgia, Connecticut and Massachusetts. It found that despite nearly $10 billion in spending since 2002, the incentives have for the most part had “no statistically significant effects” on employment. There are many other studies that reach similar conclusions.But for every study against, there is a study in favor. For example, a 2022 study by the management consultant Kearney concluded that incentives are “adding value across economies, generating a multiplier effect that includes both indirect and induced economic impacts.” And check on most every state with a robust film tax credit program and they will have posted their own study from a credentialed consultant boasting about the amazing economic impact of their program. The thing about economic development incentives is that when they work, they are supposed to build lasting capacity. The film industry in New York has added significant capacity in sound stages, production and post production facilities and a talented workforce – the program has worked in that regard and yet the price tag continues to go up.
  1. The Big Media-Political ComplexPresident Dwight Eisenhower in his farewell address famously warned America of the influence of the military-industrial complex.  Eisenhower believed the military-industrial complex would ultimately distort every US political institution and even threaten democracy itself.  I believe the same can be said today about the relationship between government and the media. The media – traditional and new – has an outsized role in sorting out the winners and the losers, giving air to new ideas – suffocating others, creating heroes and tearing them down. This is not new in and of itself, what is new is the economic interdependence, real and perceived from the application of such significant public resources such as the film credit. Think about it…while not all films, TV shows or production studios are owned by media giants – most are. Comcast owns NBC Universal. ABC is owned by the Disney Corporation. CBS is owned by Paramount. AT&T until recently owned CNN. Fox is owned by News Corp. Each and every one of these parent companies, or a subsidiary, are beneficiaries of the state’s generous film tax incentives. I would suggest the relationship distorts the coverage of news and the marketplace of ideas sometimes in subtle and other times in not so subtle ways. Tax credits are the most obvious expression of that relationship but there are others. There has been a lot of discussion lately about new media, Facebook and Twitter and how they choose to amplify or silence messages or messengers.  In some ways what they do is much simpler to quantify and deconstruct. This growing economic reliance by the media, old and new, on government and politicians creates a distortion field in the marketplace of ideas.  Now take this dynamic and juice it with big campaign contributions and sophisticated lobbying efforts and that distortion becomes even greater. 

In my view, New York simply cannot afford to keep up this pace of spending growth. The film tax credit has morphed into “The Blob”, consuming more and more of the state budget. There are real needs that could be addressed with these funds – hungry kids, a broken foster care system, people suffering from mental health and drug abuse. I would love to see one of those activist actors, the ones who preach to the rest of the world about saving the planet or some other cause, to come out and say enough, this is a waste. I’m not holding my breath.

Finally, the interdependence of big media and the political class, perceived and real, is feeding the already troubling distrust by the public in both our government and our news. No one believes what they hear in the news and everyone expects their politicians to lie to them. Expanding the film tax credit will only make it worse.

One thought on “5 Things You Need to Know About New York’s Film Tax Credit 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.