New York’s $10 billion in annual public subsidies and tax breaks to corporations were trashed as wasteful and mired in corruption during a state Senate hearing Friday.
The programs that were especially cited for failing to provide the biggest bang for the buck include the hefty $420 million film and TV industry tax credit to shoot projects in New York — and former Gov. Andrew Cuomo’s upstate economic development.
“Study after study has demonstrated there is a fairly poor return from states that offers a film and tax credit,” said Sen. James Skoufis, chair of the investigations committee.
Under questioning, Empire State Development officials could not cite any study that the film and tax credit provides a solid return on investment.
Indeed, it was revealed at the hearing that ESD does not provide a rigorous analysis of firms receiving tax subsidies.
The Citizens Budget Commission, among other researchers, have called for the tax credit program to be phased out and eliminated.
“Business subsidy programs are politicized, beset by scandal and a massive, ongoing corruption risk,” testified John Kaehny, director of the government watchdog group Reinvent Albany.
“They are a waste of public funds, and all independent analyses have found them an extremely inefficient way for government to create jobs.”
The corporate welfare, Kaehny added, contributes to Albany’s corrupt pay-to-play culture between recipients of the government largesse who then funnel tens of thousands of dollars into coffers of elected officials who support the programs.
“There is a reason that subsidies are at the center of the biggest New York corruption scandals of the last decade. The wealthy people who control the businesses receiving billions in state subsidies are among the largest campaign contributors,” Kaehny said.
Cuomo’s controversial Buffalo Billion upstate corporate subsidy programs led to massive bribery and bid-rigging corruption scandals that resulted in felony convictions against the then-governor’s right hand man, Joe Percoco, and the architect of the state programs, Alain Kaloyeros, as well as bidders who were big donors to the former governor.
Sen. John Liu (D-Queens) said the tax breaks for a select few and not others create an unfair playing field.
“Most jobs created in New York are without state subsidies. It puts companies that don’t get an incentive at a disadvantage,” Liu said.
Even advocates for the business community said awarding wealthy businesses massive subsidies has provoked a backlash — particularly when Cuomo and former Mayor Bill de Blasio offered $3 billion in tax subsidies in a failed bid to get e-tail giant Amazon to build a headquarters along the Queens waterfront.
Amazon withdrew the project amid fierce opposition.
Kathy Wylde, CEO of the Partnership for the City of New York, said people found the Amazon break offensive.
The problem, Wylde said, is the tax incentives are offered to offset the high cost of doing business in New York, including regulatory costs as well as taxes.
“In New York state, the primary role of economic development incentives has been to offset the high costs of doing business in the state. Our experience with the Amazon HQ2 fiasco illustrates how poorly New York’s approach to economic development has been working,” Wylde said.
She said the Amazon debacle was instructive.
“Virginia won the HQ2, including the additional 20,000 jobs originally intended for New York, in a bid that did not require tax subsidies because they are a state with competitive tax rates,” Wylde said.
“Instead, their offer was to put up state funding for new transit, affordable housing and a huge fund to prepare thousands of local residents for Amazon jobs. With a similar package, New York would have kept those jobs, but we were stuck with the wrong tools and a cost structure that had to be mitigated to get into the game.”
The lawmakers who complained about subsidies raised corporate taxes last year from 6.5 percent to 7.25 percent for firms making more than $5 million in income.
Agency spokesman Matt Gorton responded, “Empire State Development is laser-focused on creating jobs and expanding economic opportunity for all New Yorkers, and ESD’s incentive programs are delivering results: Tesla surpassed its job and investment commitment and the film production industry contributes more to the Empire State economy — particularly small businesses — than any investment it is provided.
“As we rebuild our economy from the pandemic, smart, strategic investments to support growing industries are an important tool in New York’s economic development tool kit.”