Music, video gamers get $50m subsidy

by E.J. McMahon |  | NY Torch

oneonta-band-imageNew York’s Legislature couldn’t leave town without approving up to $50 million a year in tax subsidies for music and video game producers, modeled after the state’s existing (and outrageous) giveaway to film and TV producers.

Under a bill passed on the final next-to-last day of session Thursday, music and video game producers will be eligible for credits worth 25 percent of “below the line” costs for productions in the New York City metro region, and 35 percent of production costs upstate.

The annual outlay is capped at $25 million for each of the two credits—which, like the $420 million a year Film and TV Production Credit, will be refundable to filers whose total tax liability comes to less than the credit amount. And, like film and TV, the music industry is glamorous, heavily unionized and amply populated with wealthy performers and investors who give generously at campaign time.

This is a very sweet deal for music producers and game developers—much sweeter than last year’s attempt by the Legislature placate those industries with an expansion of Excelsior Job Creation credits, which were dismissed by industry lobbyists as unworkable and insignificant.

The memorandum of support from the sponsors, Assemblyman Joseph Lentol (D-Brooklyn) and Martin Golden (R-Brooklyn), echoes self-serving but thinly documented industry claims that music and video gaming are, of course, absolutely essential to New York’s future, but can’t survive without big tax credits:

 … The need for a functioning incentive program can be seen
in that New York currently only generates a tiny fraction, estimated at less than four percent, of the $17 billion U.S., and less than two percent of the $55 billion global music production industry. Unfortunately, in digital gaming New York currently fares even worse, with only one percent of the U.S. $25 billion industry, and an insignificant blip of the $70 billion worldwide gaming industry.

What is truly disconcerting about these numbers is that New York is undoubtedly the home of the most creative individuals in the music industry, and graduates the finest game developers anywhere. We need robust and accessible programs to encourage these creative geniuses to work and perform in the State, for industries that have a potential for exponential growth both in Down and Up State.

Just substitute the name of another industry of your choice wherever “music” or “gaming” is mentioned, and you could make the same case for a giveaway to almost any business.

Assuming it’s signed by Governor Andrew Cuomo, who has yet to meet an entertainment industry tax break he doesn’t like, the new tax credits will remain in effect for at least three years—which means they will cost us up to $150 million by 2021. Expect the industry to begin claiming well before then that the program has been a tremendous success, as shown by inflated statistics based on the premise that absolutely no music production or video game development in the state would have occurred in the absence of the credit.

So how will we know whether these tax breaks actually delivered on their promise of, to quote again from the sponsor’s memo, “significant company revenue and permanent employment growth in the State”?

No worries there: Empire State Development Corp. (ESDC) will be required to report annually on the amount of credits claimed and paid, the number of projects by size and region, and the name of the taxpayer or taxpaying entity receiving the credits. In addition, before the program is scheduled to sunset in year three, ESDC will commission a report by “an independent third party” explaining “how the programs are operating and the overall economic impact of the programs on the State economy.”

And we know just how punctilious state economic development agencies are about delivering such reports.

Update, June 17: the two “no” votes in the Senate were Republican Sen. Fred Akshar of Broome County and Democratic Sen. Liz Krueger of Manhattan. Twenty-four members voted “no” on the Assembly bill:

  • Barclay (R)
  • Blankenbush (R)
  • Buchwald (D)
  • Castorina (R)
  • Crouch (R)
  • Fitzpatrick (R)
  • Friend (R)
  • Graf (R)
  • Hawley (R)
  • Kolb (R)
  • Lalor (R)
  • Lawrence (R)
  • Malliotakis (R)
  • McLaughlin (R)
  • Montesano (R)
  • Nojay (R)
  • Oaks (R)
  • Palmesano (R)
  • Ra (R)
  • Santabarbara (D)
  • Skoufis (D)
  • Tenney (R)
  • Walter (R)
  • Wozniak (C)

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- E.J. McMahon is the Research Director at the Empire Center for Public Policy.