While New York struggles with its mounting budget problems, Governor Paterson paved the way for future profits in the movie business by including $2.1 billion or $420 million in tax refunds per year over the next five years in his 2010-2011 State Budget by extending and increasing the funding available under the New York Film Production Tax Credit.
Under the program, qualifying fim and television productions made in New York can receive tax credits equaling 30% of qualified production costs plus an additional 5% if the production is made in New York City. In his 2010-2011 Budget, Governor Paterson made a few modifications to the program such as requiring 75% of the post-production work be completed in New York as well and requiring an end credit in the show, movie or on the DVD.
In these difficult times, one finds it hard to understand the Governor's motivation to subsidize what many consider to be a thriving industry while New York State is in such fiscal disrepair. Proponents of the credit say it has been effective at creating or retaining jobs in New York. They back this up with a 2009 Ernst & Young report that stated, for every dollar spent in tax credits, $1.90 in state and local tax revenues were generated. Some would argue that these productions would have been made in New York with or without the tax breaks.
In testimony to the Joint Legislative Fiscal Committee, Edmund McMahon, Senior Fellow, Manhattan Institute for Policy Research and Director, Empire Center for New York State Policy, Mr. McMahon testified that "More than a half-billion dollars in credits were allocated through the program between 2004 and 2008 - meaning that all other New York taxpayers will pay an average of $4 million more in taxes for each of the 120 productions supposedly attracted to the State during that period."
While it is difficult to ascertain the added benefit created by this generous subsidy, many would speculate a 30% subsidy to their industry would help them create or retain jobs as well. Perhaps the Governor should consider spreading the wealth.