July 8, 2015
In 2014, New York governor Andrew Cuomo enacted tax reforms that lowered the statutory corporate tax rate, broadened the base, and simplified the code. It was a step in the right direction, but New York, which ranks 46th in economic health among the states in a new Mercatus Center study, remains a high-tax state with complex rules. Real reform would entail ending Albany’s continued embrace of ineffective tax subsidies.
New York is hardly alone in its enthusiasm for tax incentives; every state has at least one. They take various forms—sales-tax relief, direct write-offs, credits on income taxes—but the subsidies all have similar objectives: to attract out-of-state businesses, particularly to depressed regions and neighborhoods. Accompanied by rhetoric about jobs and development, such giveaways seem to have perpetual political appeal. Touting his START-UP NY initiative, which created tax-free business zones for tech start-ups, Cuomo claimed that the zones would “jump-start the upstate economy.”
Reality belies such rhetoric. Take, for example, New York’s biggest subsidy: the $420 million annual tax break for film and television productions, which dwarfs every other handout that Albany offers, including Cuomo’s widely advertised subsidies for his ten regional economic development councils ($220 million) and for venture-capital initiatives ($50 million). Though at least 40 other states offer enticements to the film and television industry, Albany’s version is remarkably generous, providing a fully refundable 30 percent tax credit on qualified production costs and an additional 10 percent credit on productions located in depressed counties...
Read the full article at City Journal: Don’t Subsidize This