Subsidy Sheet: Gov. Cuomo’s 2012 Tax Reform Commission was ignored. It had great advice.


New York’s budget is due this week, meaning that state leaders will be deluged with countless strongly worded letters from Albany veterans. Two of the voices that have weighed in are Peter Solomon and Marilyn M. Rubin, who participated in Governor Cuomo’s 2012’s Tax Reform and Fairness Commission.

Buried deep within reporting on their letter was a topic dear to Subsidy Sheet’s heart: ending business subsidies. Solomon and Rubin said that the film/TV tax credit should be reformed or repealed – a recommendation they made eight years ago in their report on business subsidies.

The business subsidy report has been largely forgotten (all of its recommendations were ignored), but it’s no less relevant today than it was a decade ago. The 143-page analysis is written in clear, authoritative language and contains some of the best synopses of business subsidy research we’ve seen. Let’s explore some of the report’s lessons and how they apply today:

There is, however, no conclusive evidence from research studies conducted since the mid-1950s to show that business tax incentives have an impact on net economic gains to the states above and beyond the level that would have been attained absent the incentives. In addition, business tax incentives violate principles of good tax policy and tenets of good budgeting.

That may be the report’s most quoted excerpt, yet it may also be the most ignored. It has been known for three generations that business subsidies don’t work – but in 2021, eight years after the report’s publication, New York’s business subsidies are larger than ever. We are faced not only with more subsidies, but also more types of subsidies, numbers that have been steadily growing since 1994:

The number and costs of NYS tax credits available to businesses have increased significantly in recent decades (see Figure 1.1). In 1994, nine business tax credits were available to taxpayers with a cost to the state of about $200 million. By 2005, there were 33 credits costing the state $673 million. In 2009, there were 38 credits costing the state $821 million. By 2013, the number of credits available to taxpayers had jumped to 50, costing the state an estimated $1.7 billion, close to triple the cost in 2005.

The report’s helpful graphics illustrate both the rise of NY’s tax subsidies over time and the programs that cost the most:

Source: NYS Business Tax Credits: Analysis and Evaluation, Page 6.

Source: NYS Business Tax Credits: Analysis and Evaluation, Page 7.

If Rubin and Boyd updated their report for 2021, the numbers would literally be off the charts.

The report offers a way out, presenting three options for reform: major reform (eliminating all business tax credits), moderate reform (scaling back and eliminating some credits), and targeted reform (eliminating underused credits).

None of the recommendations were adopted. The number of subsidies have changed too much to do a quick calculation, but in 2018 Citizens Budget Commission estimated that state tax breaks had ballooned to a cost of at least $2.54 billion per year (this does not include spending on the state’s other economic development programs, which totaled $1.8 billion).

Policymakers can disagree on whether or not the main argument of Solomon and Rubin’s letter holds up. But for their tax subsidy recommendations, there is no debate.

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