State Senate hearing examines business subsidies and entertainment credits

ALBANY, N.Y. (NEXSTAR) — The New York State Senate held a joint hearing on November 20 about returns on investment (ROI) from tax incentives. The Chairs of three standing committees convened to discuss whether companies operate in New York because the state subsidizes industries to the tune of $11 billion, or if they’d continue doing business here even without that money.

Much of the testimony and questioning in the hearing concerned a December 2023 report from the independent consulting group PFM for the New York State Department of Taxation and Finance titled “Economic Impact of Tax Incentive Programs.” It’s available for you to read at the bottom of this story.

As outlined in PFM’s analysis, state tax incentives represent an investment that should boost the local economy and cut costs for businesses. Analyzing different ROIs, critics question whether current subsidies serve that purpose. Do they favor certain businesses, an age-old practice called “picking winners and losers”? After all, watchdog groups point to studies showing that many businesses would or have already come to New York without any incentives whatsoever.

But supporters say that the incentives keep New York competitive. They help close deals, balance the state’s high tax burden, and encourage job growth. So, PFM crunched the data, interviewed experts, and compared New York’s programs to those in other states.

In particular, entertainment tax credits—for film production, film post-production, commercials, and theatre—represented a major topic issue at the hearing and in the report. Check out the related opening line of questioning from Democratic State Sen. James Skoufis, Chair of the Senate Standing Committee on Investigations and Government Operations, for Hope Knight, President of Empire State Development:

Such entertainment tax credits cost billions. They support the film, television, and live theatre industries, although their growth in New York lags behind national trends. Overall, jobs in that sector grew by just 8.2% between 2012 and 2022, compared to 31.1% nationally.

Spending more than $4.6 billion over the past decade, New York boasts some of the most generous entertainment tax incentives in the country. Because they’re refundable, the credits are expensive; the state pays even if the company doesn’t owe anything in taxes. And, because the same companies often get the same credits every year, it’s hard to quantify whether any growth would be long-term or self-sustaining.

Georgia, for example, saw a lot of growth in employment in the industry after increasing their tax credits. But Michigan and Florida also saw continued growth even after eliminating theirs.

This tension lies at the center of the discussion: the “but-for” conundrum. But for the incentives, would companies still do business and stimulate economic activity in New York? Or would the state’s well-established entertainment industry—including already developed infrastructure and an experienced labor force—be enough to sustain production even without the credits?

Film production

Launched in 2004, the Empire State Film Production Tax Credit has supported 537 projects, contributing $8.7 billion in economic activity. This incentive offers as much as a 30% credit on expenses, plus extra bonuses for shooting in certain places. New York also raised its tax credit cap from $420 million to $700 million in 2024.

The credit created over 142,600 jobs from 2018 to 2022, generating $16.3 billion in wages. Workers in the sector averaged almost $150,000 per year. But it also generated $2.27 billion in state and local taxes between those years, falling short of its $3.1 billion price tag. For every dollar spent, New York recovered just $0.15 directly—via tax revenue—and $0.31 indirectly, according to PFM’s report.

While supporters argue for intangible benefits like exposure in iconic films and shows, the financial benefit of such branding remains murky. And the state can’t control whether a production depicts New York in a positive light, so any effects on the local tourism industry are difficult to account for financially.

Film post-production

New York’s Film Post-Production Tax Credit, also designed to attract film companies and create jobs, also failed to generate positive returns, according to the report. Allocating $7 million when established in 2010, the credit ballooned to $45 million as of 2024.

From 2018 to 2022, New York issued $112 million in post-production credits. The ROI doesn’t square well with the $33.9 million in total tax revenue it generated. All told, it made just $0.14 in state taxes and $0.30 in total taxes for every dollar spent. It supported 5,040 specialized jobs in those years, with wages well above state averages. But that growth in pay for workers didn’t keep up with the rising cost of the credits.

Commercial production

Introduced in 2007 and expiring in 2029, New York’s Commercial Production Credit pays out as much as $7 million yearly in refundable credits to lure productions that film advertisements, creating jobs and supporting local businesses in the process. Productions downstate can get 20% back from the state on eligible expenses, while upstate projects can get 30%. Companies have to spend at least 75% of their production costs in-state, with minimums of $500,000 downstate and $100,000 upstate.

From 2017 to 2021, the state spent $17 million on the program, creating 2,500 jobs whose wages totaled about $285 million. Despite the economic activity, according to PFM, the program generated $7.9 million in direct tax revenue.

Still, the ROI tops that of the film production and post-production credits. It directly averages about $0.46 for every dollar in state tax revenue, but indirectly, it almost breaks even at $0.99.

Musical and theatrical production

The Empire State Musical and Theatrical Production Tax Credit generated only $0.02 in direct tax revenue and $0.06 in total tax revenue for every dollar from 2017 to 2021. It paid for about 360 jobs across the state.

Launched in 2015, it offers a 25% refundable credit to productions that perform in venues with at least 1,000 seats and make at least three tour stops upstate. The state earmarks $8 million for it every year, with no more than 10 claims in a year.

The New York City Musical and Theatrical Production Tax Credit, on the other hand, generated $0.23 in state revenue for every dollar. Introduced in 2021 to help New York City’s theatre scene recover from the pandemic, the program offsets production costs for live shows in qualifying venues.

Eligible productions in Manhattan venues can get offsets on up to 25% of expenses, with a $3 million cap for big venues and $350,000 for small ones. Productions that make above a certain threshold also have to contribute to state cultural programs.

While its ROI still fell short, supporters of the credit in the city argue that its value lies in cultural prestige that drives global tourism. The economic engine of Broadway sells almost half of all tickets to visitors to the area. They rent local hotel rooms, eat at local restaurants, and shop locally.

Broadway numbers rebounded steadily post-pandemic, with 12.2 million theatre-goers during the 2022-2023 season, compared to 7 million during 2021-2022. Still, critics question whether blockbuster productions would have thrived without the credit.

Testimony

Hope Knight from Empire State Development responded to the criticism by backing a different accounting method that showed an ROI of $24 in economic output for every public dollar spent. And coalition of New York-based multicultural filmmakers, producers, and civil rights groups also highlighted that figure in written testimony. They added that, in a survey of New Yorkers, 84% want stories about New York to be filmed here.

Brian O’Leary, describing the Motion Picture Association (MPA), testified at the joint hearing to rebut the PFM report. He argued that its numbers came from faulty data, bad assumptions, and outdated studies. O’Leary cited findings—from Ernst & Young, Regional Economic Models, Inc., and NYU economists—showing an added $10.5 billion in direct spending in 2021-2022 alone.

Meanwhile, the National Federation of Independent Business (NFIB) called for a head-to-toe reevaluation of New York’s economic development strategy, using the film tax credit as an example. In her testimony, Ashley Ranslow, NFIB’s New York Director, criticized the credit’s price tag. She also pointed out that some state-backed film industry projects—like the SolarCity factory and Central New York Film Hub—never met job or revenue expectations.

Testimony from watchdog group Reinvent Albany also took aim at New York’s entertainment tax credits, calling them a wasteful subsidy. According to their analysis, in 2024, New York taxpayers directly paid $75,000 for every single full-time film or television production job, an increase of 12% since 2022.

Reinvent Albany and other expert written and oral testimony repeatedly argued that investing in practical improvements to public services—transit, housing, schools, or childcare, for example—would have a much better ROI. But Reinvent Albany also targeted the PFM report‘s failure to engage with “but-for.” Without addressing that test, they argued, it won’t be possible to accurately measure the true impacts of entertainment tax credits.

Besides Skoufis on the Democratic side, Sen. Liz Kreuger—who chairs the Senate Finance Committee—ran the hearing. The Chair of the Senate Committee on Commerce, Economic Development & Small Business, Sen. Sean Ryan, also took part. State Senators Tom O’Mara—Ranking Member of the Finance and Investigations and Government Committees—and Dean Murray, the Ranking Member of Economic Development and Small Business, represented Senate Republicans. Three more Finance Committee participated in the hearing: Democrats Leroy Comrie and Kevin Thomas, and Republican Peter Oberacker.

You can check out the entire four-hour-long hearing on YouTube. And you can read the 359-page PFM report below: