In a sign that she continues to know how to make news, Democratic gubernatorial candidate Cynthia Nixon has gone after rival Andrew Cuomo for showering taxpayer dollars on the industry that helped make her a star. Last week she had this to say to the Buffalo News about New York’s expensive film-and-TV tax-credit program, one of the nation’s largest:
Asked for her view of a major tax break Cuomo has championed for the film and television industry, Nixon said she is studying the issue. But, she quickly added, “I don’t think there’s any real truth that that enormous expenditure of money is making a significant enough different in production to justify it.’’ She added that the more than $420 million annual tax break the industry receives “doesn’t merit the investment” the state is giving in tax credits. She said the beneficiaries are predominately large entertainment companies.
After getting some blowback for criticizing a program that indirectly benefited her as Miranda Hobbes in the two Sex and the City movies (actors’ salaries are not eligible for the subsidies, and the long-running TV show completed filming before the program was created), she made it clear she was serious about the issue, as the New York Post reported:
“Cynthia is opposed to enormous tax giveaways to large corporations with no strings attached. As governor, she will reform the film tax credit program to ensure greater benefit to small and independent films,” said Nixon campaign spokeswoman Rebecca Katz.
And one observer succinctly summed up how her criticism of the film program might be perceived:
One budget watchdog who has slammed the film tax credit as “classic corporate welfare” said Nixon’s criticism holds more weight because she’s questioning her own industry — and could risk a backlash from film moguls for biting the hand that feeds her.
“She has something on the line. It’s not self serving,” said E.J. McMahon of the Empire Center for Public Policy.
Nixon is also touching on a form of “economic development” that has grown like topsy in recent years, drawing states into what would be considered, if it were cut-and-sew factories rather than glamorous entertainment productions involved, a competitive race-to-the-bottom to throw money at less-than-needy studios. As the National Conference of State Legislatures reported last month, the big boom in state film and TV subsidies that occurred in the 1990s has definitely subsided:
Since 2009, 13 states have ended their film incentive programs. Most recently, Wyoming and West Virginia eliminated film incentive programs. Wyoming allowed its program to expire, and a bill to reinstate it failed during the 2017 legislative session. On Jan. 29, 2018, West Virginia’s governor signed a bill passed by the Legislature to eliminate the states’ film tax credits. This action followed a January 2018 report released by the states’ legislative auditor that cited the credits’ minimal economic benefit to the state.
These actions mark a larger trend of states re-evaluating or paring back film incentive programs.
New York, on the other hand, has been moving in the opposite direction. Its once-small tax-credit program for the entertainment industry is now the country’s largest, as Crane’s New York Business noted last year:
According to the Citizens Budget Commission, when the state capped the program’s annual cost at $25 million in 2004, less than $1 million in tax credits were issued. Proponents argue that the incentive was not compelling enough. In 2010 the credits awarded reached $211 million, spurring a surge in production. It grew to about $427 million in 2014. Through 2019, when the program will expire if not renewed, it will have cost the state $4.5 billion since inception, the watchdog group calculated.
Cuomo, a big fan of the film-credit program, has proposed extending it beyond 2019.
Compared to some other states, New York’s film-credit program has some features that don’t squeal like pigs. It offers some extra incentives for filming upstate, where this activity might not otherwise occur. And it encourages use of New York City’s own local film infrastructure (especially sound stages), not just fly-by-night filming.
But on the other hand, New York’s credit is arguably far too generous, providing refundable tax credits for up to 30 percent of production and post-production costs. That means the subsidies are by no means limited by the production company’s tax liability in New York; they get a check for credits beyond that.
The question of what Empire State taxpayers are getting in exchange for these subsidies is never clear and compelling, despite regular claims of an economic bonanza that would sound quite normal coming from the lips of a supply-side snake-oil salesman. And that brings up a question about the Cuomo administration that goes beyond the film-credit program: according to a 2017 study from Pew Charitable Trusts, New York is one of 23 states with poor systems for evaluating its economic development tax incentives. Given the size of the state and the complexity of its development efforts, that’s a scandal waiting to happen.
There’s a particularly sharp angle Nixon could take in questioning Cuomo’s support for entertainment credits, thanks to his Hollywood fundraising. The Wall Street Journal (and some New York Republicans) pointed the way last fall:
Criticism flared this week when Mr. Cuomo attended a California fundraiser for his 2018 re-election campaign with some of Hollywood’s top executives.
The event was held Tuesday at the home of Universal Filmed Entertainment Group executive Jeffrey Shell, according to an invitation. CBS Chief Executive Leslie Moonves was listed on the invitation. Tickets were going for up to $50,000. Both Universal and CBS have received the tax credits, state records show. The companies declined to comment….
Harry Wilson, a New York businessman considering a GOP 2018 challenge to Mr. Cuomo, criticized the event, calling the tax credit “corporate welfare.” While the governor raises money from “those same wealthy Hollywood producers…New Yorkers bear the cost, and he reaps the benefits.”
Yeah, Nixon’s not the only one dealing with a hand that feeds.