Red Carpet Treatment: A Tax Credit for the Tonight Show

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A poster announcing the premiere of The Tonight Show with Jimmy Fallon hangs in the 42nd/Port Authority subway station.

New York hosted more than 180 productions last year. Most of them were feature films as well as TV shows like Boardwalk Empire and Girls.

Kenneth Adams, commissioner of the New York State Department of Economic Development, called it “a banner year” for New York’s entertainment industry. And he said New York’s tax credit played a big role.

“We do compete, against Hollywood, against Toronto, against North Carolina, Louisiana, other states that have these programs,” he said. "And so we work very, very hard to partner with the industry and keep these jobs here, and grow these jobs here."

The state created the credit a decade ago and since then, it’s tripled.  Last year, Governor Andrew Cuomo extended the credit for another five years and added some new language: For “relocated television productions” that spent “at least five seasons out of state,” “with an audience of 200 or more,” "that incur at least $30 million in annual production costs in the state." If that sounds similar to the Tonight Show, Adams said, that’s the point.

“We did make changes to the program, because we did want to attract these long-running, high-budget productions to New York State."

In addition to the Tonight Show, Adams said the expanded credit has helped entice America’s Got Talent to film here as well, and he’s hoping for more. 

According to Adams, the tax credit pays for itself and then some: It’s capped at $420 million a year. Meanwhile, he said, the industry generated $2 billion in spending last year and supports 125,000 jobs. These jobs aren’t for the marquee names, whose salaries aren’t covered by the credit, but for behind-the-scenes positions like set designers, lighting technicians and wardrobe assistants. 

Two studies, one from the state comptroller, and another commissioned by the Governor’s Office of Motion Picture and Television Development and the Motion Picture Association of America, found the credit boosts the local economy.

Some researchers, however, are skeptical. 

Marilyn Marks Rubin is a professor of fiscal policy at John Jay College of Criminal Justice. She recently co-authored a study of the state’s business tax credits for a commission convened by the governor. 

She said the film credit has gotten so big it’s basically a cash payment to production companies, which translates into higher taxes for the rest of us or fewer services.

“What we found was that the economic activity generated by the industry does not merit the kind of credit they’ve been getting,” she said. 

But if you missed reading this report, you’re not alone.

Sources said the governor’s office didn’t approve of the findings so when the full report was published, that 140-page section was not included. The governor’s office responded that the commission was in charge of deciding what made it into the final report and noted that the report did include the study's basic recommendation of reducing the film credit by $50 million.

But Rubin isn’t the only alone in raising concerns about the tax credit. The nonprofit Tax Foundation says the incentives are a race to the bottom between states competing for business.  

Jared Meyer, a policy analyst at the Manhattan Institute, considers them a waste of money.

"A state could really attract any industry if they paid a quarter to a third of its costs,” he said. “But what I think is a better system is to lower the tax rates for everyone and not have politicians pick the winners or losers.”

This year, one of those winners is the Tonight Show. NBC said the decision to move to New York was a creative one, but the credits made it possible. The company said the show will bring more than 500 full time jobs as well as a few thousand temporary positions the city.

And come tax season, NBC said it will definitely apply for the new credit.