NY’s Biggest Corporate Giveaway Still Looks Bad Despite Consultant’s Rose-Colored Glasses 

State Lost at Least $2 Billion Over 5 Years to Film/TV Subsidies

An independent consultant’s report has again confirmed that some of New York’s biggest corporate giveaways are a bad deal for taxpayers. Despite using inflated job creation and retention figures and failing to answer whether the subsidies were necessary in the first place (the “but-for test”), the PFM Group’s Economic Impact of Tax Incentive Programs report includes valuable data and is a building block for yet more rigorous, independent assessments of the State’s $4 billion in corporate subsidies. The December 2023 report was published on the NYS Department of Taxation and Finance website with no fanfare at the end of January 2024. (Archived by Reinvent Albany here.) 

After scathing criticism of the State’s corporate subsidies at a January 2022 Senate Finance Committee Hearing (see video here), the Legislature, led by Senator James Skoufis, inserted into the state budget a provision requiring the State to hire an independent consultant to answer basic questions about state corporate subsidies. 

PFM Group’s 359-page report uses a sophisticated economic analysis tool called IMPLAN to measure direct and indirect economic activity and tax generation. Our take is that overall PFM does an honest and professional job, and there is much to learn from their report. Unfortunately, PFM completely fails to answer one of the most fundamental questions the state law asked, which is called the “but-for test”:

(d) whether similar job creation or private investment would have occurred without the existence of a state tax incentive; (S8008c Section JJJ page 69)

Without answering this question – or seriously attempting to – it is hard to establish the cost-benefit of these subsidies. For example, if subsidy recipients reported that they created or retained 10,000 jobs, PFM should have determined how many of those jobs would have been created or retained anyway.  

Reinvent Albany’s Top Takeaways from NYS Tax Finance/PFM Subsidy Impact Report

  1. The Film/TV Production Tax Credit is truly a boondoggle, with a five-year net cost to NY taxpayers of $2 billion. From 2018 to 2022, the state film/TV tax giveaway cost state taxpayers $3 billion and resulted in about $1 billion in total state tax revenue from all induced economic activity. For every $1 in NYS subsidies, the State got back $0.31 in taxes, which is probably far too high an estimate since it assumes all film jobs resulted from the state subsidy (Table 15, Page 48).

  2. New York State will be completely guessing how many jobs are created until it finds a way to answer the “but-for test” using a reasonable methodology. It is dishonest and defies common sense for the State or its consultants to assume that every job at a company getting subsidies is the result of those subsidies.

  3. It is important for the State to evaluate programs as independently and objectively as possible. In some cases, that will mean hiring an independent consultant. While PFM didn’t answer one crucial question, its report is a baseline for future analysis of tax expenditures.