By:  Benyamin Davidsons

New York’s Film Production Credit, which was expanded to spur NY business in the film making industry, has not lived up to its hype.

As reported by Crain’s NY, the state’s tax credit for film productions has obtained a “net negative”, failing to yield positive returns on taxpayers’ investment, per a new study commissioned by the state itself.  The credit, newly expanded to $700 million annually, gives NYS back just 31 cents for every dollar it spends on the tax break, despite state leaders continued push to expand it in hopes of improving the economy and creating new high-paying jobs.

In last year’s state budget, the tax credit was expanded to cover up to $700 million in costs annually for film and television productions that opt to work in the state, forgiving 30% of eligible costs for each movie and show. Gov. Kathy Hochul also pushed lawmakers to extend the program through 2034 — despite warnings from watchdogs that said the incentive may not achieve its stated goal of spurring economic activity.

Per Crain’s, the new research by the financial advisory firm PFM Group, was commissioned by the state’s Department of Taxation and Finance to study each of New York’s economic development tax credits. The study was a required provision in the 2022 state budget and was worked on over the course of 2023.  It found that for each dollar spent with the tax break in the film industry, NY gets back just New York gets back just 31 cents.  The program has already cost the state some $5 billion over the last ten years, making it the largest of New York’s many tax incentives.  “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 study’s authors wrote.

This study backs what critics have long been saying– namely, that a lot of the filming activity funded by the credit would have happened in NY regardless of the credit, due to its existing workforce and infrastructure. Also, the credit’s unlimited duration makes it more of an “ongoing subsidy” rather than a one-time incentive, leaving the state with an ongoing bill even after the state is established as a stronghold for the film industry.  In fact, many of the productions that are benefitting from the annual tax credits are long-running television series which have been filmed in NY for years and which are already established here.

Per Crain’s, this undermines the program’s goal of attracting new business. The study also found that the job-creation claim is “inconclusive at best”.  NY first launched the credit in 2004, but film industry employment remained unchanged for years till it increased in 2010.  The state’s share of employment in the industry relative to the nationwide market has since declined.

A spokesman for Gov. Hochul commented saying their office is reviewing the report.  The spokesperson pointing to a different study, commissioned by the Empire State Development Corp, which found that NY’s state and local governments raked in a combined $1.70 for every dollar spent on the film tax credit in 2021 and 2022 (although the state by itself, excluding NYC, still lost out overall). “New York’s  tax credits and incentive programs are critical to growing the state’s economy, boosting innovation, and creating good jobs, which is why the Legislature approved them in the first place.”