Tax incentives in New York are government-provided tax breaks and subsidies designed to encourage specific economic activities, such as business investment, job creation, and housing development. This page covers CBC’s work on the effectiveness of economic development programs, the evaluation of film and theatrical tax credits, property tax incentive reform, the fiscal impact of industrial and commercial abatements, and strategies for incentivizing mixed-income housing.
This page was created with AICBC Insights uses AI to group, analyze and present data and recommendations from CBC's publications. Always reference the cited sources to verify important details..
Absent paying for itself, a tax break should only be renewed if there is clear evidence that the program is the most cost-effective way to deliver a critical, quantifiable public benefit.
The minimal return on most credits highlights the need to target tax breaks more effectively.
New York’s State and local governments should focus their economic development activities on job creation and retention incentives with proven benefits and high cost-effectiveness.
State leaders should reform tax incentives to make housing development financially feasible.
State leaders should leverage proven, cost-effective tax incentives to attract and retain businesses.
State leaders should shrink or eliminate tax incentives and economic programs that are not proven to create jobs or increase output.
State leaders should phase out ineffective economic development subsidies, such as the film tax and theatrical tax credits.
State leaders should reduce the cost of doing business by letting the business tax surcharge expire.
Key Data
In October 2026, the CBC reported that New York State projects its economic development tax breaks will cost $3.3 billion in tax year 2025 and increase 36% to $4.5 billion in tax year 2026.
In September 2025, the CBC noted that the 485-x property tax incentive imposes wage floor requirements on projects with 100 or more units, leading developers to build 99-unit buildings to avoid triggering those wage floors.
In November 2024, the CBC testified that New York State has spent over $5.8 billion since 2007 on film and commercial tax credits, which return less than 30 cents in State tax revenue for every dollar awarded.
In August 2024, the CBC reported that the annual cost of New York City's Industrial and Commercial Abatement Program (ICAP) grew from $81.4 million in fiscal year 2017 to $506.3 million in fiscal year 2024, despite a 2016 evaluation showing only 3.6% of projects required the tax break to be feasible.
In December 2022, the CBC reported that the now-expired 421-g tax incentive converted nearly 13 million square feet of office space into 12,865 residential units between 1995 and 2006, costing $1.2 billion, or $92,000 per unit.
New York State and its local governments spent $12.7 billion on economic development in 2025, driven largely by state tax breaks projected to rise from $3.3 billion in 2025 to $4.5 billion in 2026. Despite this growing expenditure, independent evaluations show that most state tax incentives fail to generate a positive return on investment, with film and theatrical credits returning less than 30 cents for every dollar awarded.
Recommendations related to Tax Incentives
Absent paying for itself, a tax break should only be renewed if there is clear evidence that the program is the most cost-effective way to deliver a critical, quantifiable public benefit.
The minimal return on most credits highlights the need to target tax breaks more effectively.
New York’s State and local governments should focus their economic development activities on job creation and retention incentives with proven benefits and high cost-effectiveness.
Key Data
$3.3 billion
— Projected cost of New York State tax breaks in tax year 2025.
$4.5 billion
— Projected cost of New York State tax breaks in tax year 2026, representing a 36% increase from 2025.
30 cents
— Amount returned in State tax revenue for every dollar of film and theatrical tax credits awarded.
$3.1 billion
— New York State's economic development incentives in foregone tax revenue in tax year 2023.
$7.0 billion
— Amount of performance-based tax credits Micron's semiconductor fabrication facility in Clay, NY is eligible for.
$2.0 billion
— Amount spent by New York City on tax breaks in 2025.
Sherif Soliman has more than 30 years of experience in government and currently serves as Budget Director of the New York City Mayor’s Office of Management and Budget. In this role, he oversees the city’s fiscal policy, including the development of the expense and capital budgets, the city’s bond and…
New York faces a structural budget gap and declining population, necessitating a strategic reevaluation of state spending and economic policy to improve affordability. To boost competitiveness, the state should reform or eliminate ineffective tax incentives and economic development subsidies while prioritizing cost-effective investments.
Recommendations related to Tax Incentives
State leaders should reform tax incentives to make housing development financially feasible.
State leaders should leverage proven, cost-effective tax incentives to attract and retain businesses.
State leaders should shrink or eliminate tax incentives and economic programs that are not proven to create jobs or increase output.
State leaders should phase out ineffective economic development subsidies, such as the film tax and theatrical tax credits.
State leaders should reduce the cost of doing business by letting the business tax surcharge expire.
Key Data
$20 billion
— The amount by which State recurring spending exceeds its recurring receipts annually, creating a structural budget gap.
4.7 percent
— The rate of New York State's population growth since 2000.
20.9 percent
— The rate of national population growth since 2000.
12 percent
— The decline in public school enrollment since 2021.
The post examines the factors driving high construction costs in New York City, including labor, materials, and regulatory hurdles, while noting that the 485-x property tax incentive's wage floor requirements influence developer decisions on building size. It does not provide specific recommendations or data regarding tax incentives.
To maintain New York City's competitiveness, the next administration must evaluate existing tax incentives to ensure they are effective and eliminate those that fail to deliver results. This approach is part of a broader strategy to improve affordability and ensure the city remains an attractive destination for residents and businesses.
Recommendations related to Tax Incentives
The next mayor should use tax incentives that work and scrap the ones that don’t.
New York State spends $11 billion annually on economic development programs, yet most tax incentives fail to pay for themselves or generate significant returns on investment. Policymakers should prioritize performance-based incentives and retool ineffective programs, such as film tax credits, to ensure taxpayer funds are used efficiently.
Recommendations related to Tax Incentives
New York should ensure that tax credit programs are designed in ways that reward actual performance in key sectors, rather than hiring or investment that would have happened anyway.
The State should independently evaluate economic development programs on a regular basis to determine their effectiveness.
Lawmakers should waive tax secrecy provisions to grant evaluators access to the tax records needed to evaluate programs effectively.
The State should avoid picking winners and losers by offering incentives tailored to specific industries or firms, as predicting which sectors will grow is difficult.
New York should retool film tax credit programs to surgically target incentives to portions of the film industry that are truly at risk while shrinking spending on ineffective areas.
The State should use performance-based incentives that have demonstrated a strong return on investment, such as the Excelsior tax credit.
Key Data
$11 billion
— Annual cost of economic development programs in New York State and its localities.
$5.8 billion
— Amount spent by New York State on Film Production, Film Post-Production, and Commercial Production Tax Credit programs since 2007.
30 cents
— Return in State tax revenue for every dollar of tax credits awarded by the film production and post-production programs.
17.6 percent
— New York's share of national film production employment in 2022.
$878 million
— Cost to Georgia in foregone tax revenue for its film tax credit in fiscal year 2023.
$700 million
— The increased annual cap for the film tax credit established in the fiscal year 2023 State budget.
New York City's Industrial and Commercial Abatement Program (ICAP) has seen its costs grow six-fold to $506.3 million in fiscal year 2024, despite evidence that only 3.6 percent of projects actually required these tax breaks to be financially feasible. The program should not be extended for four years without a thorough, objective evaluation to determine if it is a cost-effective use of public funds.
Recommendations related to Tax Incentives
The Governor should veto S9822/A10530 because it extends the Industrial and Commercial Abatement Program (ICAP) without assessing its necessity for economic growth.
The Governor should sign a one-year extension, negotiated as a Chapter amendment, to allow time to objectively evaluate the program's cost-effectiveness.
The state should identify eligibility and benefit changes to improve the cost-effectiveness of the Industrial and Commercial Abatement Program.
Key Data
3.6%
— Percentage of projects receiving ICAP benefits that required the tax breaks to be financially feasible.
$81.4 million
— Cost of the ICAP program in fiscal year 2017.
$506.3 million
— Cost of the ICAP program in fiscal year 2024.
Two-thirds
— Portion of ICAP recipients that receive 25-year abatements.
$500 million
— Annual spending on the ICAP program without a determination of its effectiveness.
The proposed legislation S7562/A7757, which would retroactively expand eligibility for the Empire State Film Production Credit, should be vetoed to prevent the depletion of state resources on productions already committed to filming in New York. Instead of engaging in a "race to the bottom" through lucrative tax incentives, the state should prioritize economic growth by leveraging its existing comparative strengths and improving the overall business climate.
Recommendations related to Tax Incentives
The Governor should veto S7562/A7757, which expands eligibility for the Empire State Film Production Credit.
New York should focus on expanding its economy based on its comparative strengths, such as human capital and cultural and natural amenities.
The State should enhance its willingness to make it easier to do business in New York instead of engaging in interstate competition for the most lucrative incentives.
50,000 is the number of jobs New York State expects to be created over the next 20 years by attracting Micron to central New York with $7.2 billion of incentives. New York has long been a leader in economic development, with the State and localities offering tax incentives and spending…
New York spends approximately $10 billion annually on economic development programs, yet often lacks rigorous evidence that these tax incentives drive substantial job or economic growth. Instead of relying on unproven subsidies like film tax credits and horse racing facility renovations, the state should prioritize investments in human capital, infrastructure, and essential public services.
Recommendations related to Tax Incentives
New York should focus on developing human capital—both educating and training New Yorkers and attracting great talent, providing high-quality, essential public services, and maintaining its infrastructure so that goods and people can move easily and safely.
New York should stop following its motto—“Excelsior”! regarding evidence-baseless programs that are likely inefficient investments and perpetuate the interstate competitive race to the bottom.
The state should conduct a thorough, rigorous evaluation to identify whether a given incentive program had induced additional economic activity and compare that benefit to the cost and opportunity cost.
The state should direct spending to cost-effective programs that grow the economy based on the results of the state-contracted evaluation of the efficacy of economic development incentives.
Key Data
$10 billion
— Annual economic development spending by New York state and its localities.
$14.6 billion
— Possible lifetime cost of the film tax credit under the executive budget proposal.
$44 million
— Annual cost of four city tax incentives that the legislature proposes to extend.
$455 million
— Proposed funding to renovate and expand Belmont Park.
$6.5 billion
— Amount already granted in film tax credits without rigorous analysis of program necessity.
$420 million
— Current annual cap for the Empire State Film Tax Credit.
The proposed expansion of the New York State Film Tax Credit, which would increase the lifetime maximum cost by 55% to $14.6 billion, should be rejected due to a lack of rigorous evidence demonstrating its economic necessity. Instead of increasing subsidies to compete with other states, the program should be shrunk until a comprehensive evaluation proves its cost-effectiveness and long-term value.
Recommendations related to Tax Incentives
The State should reject the proposed expansion of the Empire State Film Tax Credit.
The State should be shrinking the film tax credit program until a rigorous analysis justifies some form of incentive.
Any future policy regarding the film tax credit should be informed by a rigorous evaluation that determines the economic activity induced by the incentive and compares it to the program's cost.
The State should phase out the film tax credit because it has failed to demonstrate that the credit is necessary to attract productions or create jobs that otherwise would not exist in New York.
Tax incentives should only be provided if justified by rigorous analysis.
Key Data
$14.6 billion
— The proposed lifetime maximum cost of the film tax credit program under the Executive Budget.
$9.4 billion
— The lifetime maximum cost of the film tax credit program under current law.
55%
— The increase in the total maximum cost of the film tax credit program under the proposed expansion.
$700 million
— The proposed annual credit cap for the film tax credit starting in 2024.
$420 million
— The current annual credit cap for the film tax credit.
$6.5 billion
— The total amount of credits provided since the start of the film tax credit program.
Commercial-to-residential conversions can revitalize neighborhoods, but successful implementation requires careful policy design, including targeted tax incentives for mixed-income projects and necessary regulatory relief. Financial feasibility analyses are essential to determine when subsidies are truly needed to make these conversions viable compared to new construction.
Recommendations related to Tax Incentives
Policymakers should take steps to ensure that those incentives are well-targeted and cost-effective for projects that require subsidy or tax breaks.
Any conversion program should be based on a detailed financial feasibility analysis that looks at the types of conversions that would be feasible without subsidy, and which would require subsidies.
Incentives might be needed to make it worthwhile for developers to convert to mixed-income rentals instead of market-rate rentals or condominiums.
Tax incentives would be needed to support mixed-income rental conversions.
Key Data
13 million square feet
— The amount of commercial space converted into residential units under the 421-g program.
12,865
— The number of residential units created from converted commercial space under the 421-g program.
120 million square feet
— The additional office space that could be converted to residential use if the FAR cap age limit is extended to buildings built before 1991.
12 FAR
— The density threshold above which buildings would be permitted to convert in their entirety to residential use under proposed regulatory relief.
New York City's package of economic development tax incentives, which costs the city $44 million annually in foregone revenue, should not be extended without a rigorous evaluation of their effectiveness and efficiency. Previous assessments found that programs like the Commercial Revitalization Program and Commercial Expansion Program failed to significantly improve office vacancy rates or employment, suggesting that any future extensions must be justified by prospective impact models.
Recommendations related to Tax Incentives
An incentive should not be extended absent a rigorous evaluation of its effectiveness and efficiency and an analysis demonstrating it is needed to meet current and future goals.
For programs like CEP and CRP, existing evaluations should inform the Legislature’s decision of whether to extend, amend, or sunset these programs.
Any extension or expansion of an existing tax expenditure should be supported by a prospective model of its impacts and justified by an evaluation that determines whether the tax expenditure achieved its purpose.
Key Data
$44 million
— Annual foregone revenue for the package of New York City economic development tax incentives.
$14 million
— Annual foregone revenue from property taxes for the package of tax incentives.
$15 million
— Annual foregone revenue from utility taxes for the package of tax incentives.
$7 million
— Annual foregone revenue from commercial rent taxes for the package of tax incentives.
$8 million
— Annual foregone revenue from sales taxes for the package of tax incentives.
The 421-g property tax incentive program successfully encouraged the conversion of obsolete office buildings into residential units in lower Manhattan, creating over 12,000 new homes between 1995 and 2006. Future efforts to revitalize office markets through conversions should prioritize regulatory relief, such as lifting floor area ratio caps, and ensure incentives are cost-effective and targeted to specific needs.
Recommendations related to Tax Incentives
Regulatory relief of various forms is essential, including lifting the FAR cap.
An as-of-right approvals process is needed to ensure that the market is able to dictate when and where office-to-residential conversions make sense.
Policymakers should design a cost-effective incentive that is appropriately targeted and empirically grounded by a feasibility study.
Any new conversion program should be appropriately targeted and empirically grounded by a feasibility study and policy design.
Policymakers should consider different incentive structures to limit the City’s fiscal downside risk, such as capping incentives based on square footage rather than time.
Key Data
$1.2 billion
— Total nominal cost of the 421-g property tax incentive program through the end of fiscal year 2022.
12,865
— Number of new residential units created through the 421-g program.
13 million square feet
— Amount of office space converted to residential use between 1995 and 2006 using the 421-g incentive.
28 percent
— Decrease in the aggregate assessed value of lower Manhattan office buildings between 1991 and 1994.
$92,000
— Cost per unit of the 421-g property tax incentive program.
200 percent
— Increase in lower Manhattan's housing stock between 1990 and 2020.
New York City's property tax system requires comprehensive reform to address structural inequities, such as the lack of transparency and valuation issues that disproportionately affect different property classes. Policymakers should evaluate the proposed residential class and tax relief programs holistically to ensure a more equitable and transparent system rather than implementing piecemeal changes.
Recommendations related to Tax Incentives
The City should release a detailed analysis that assesses how tax burdens would be redistributed within the proposed new residential class.
The Commission should make additional recommendations if current assessment procedures for rental and commercial property do not lead to equitable treatment within those property classes.
Policymakers must resist pulling apart the recommendations, such as implementing a circuit breaker without changes in valuation and assessment.
There should be public discussion about the goals of these programs and whether the proposed designs would provide the necessary amount of tax relief to the appropriate set of property owners.
The City should analyze the extent to which there may be intra-class inequities resulting from the Department of Finance’s valuation methods.
Key Data
$1.5 trillion
— Estimated total market value of the new residential class, representing a 40 percent increase from the current valuation.
0.81 percent
— Nominal tax rate for the new residential class before a homestead exemption and circuit breaker, compared to current rates of 20.309 percent in Class 1 and 12.267 percent in Class 2.
$940 or $960 per $100,000
— Property tax amount for a property not eligible for a homestead exemption, compared to the previous $810 per $100,000 of market value.
$0.83 per $100
— Median effective tax rate for one- to three-family homes, compared to $1.53 for large rentals and $1.72 for office buildings.
The Penn Station Area Civic and Land Use Improvement Project utilizes a financing framework involving payments in lieu of property taxes and tax abatements to fund capital improvements. To ensure maximum value, future development projects should be scrutinized to confirm that tax abatements are necessary for project feasibility and are primarily focused on driving economic growth.
Recommendations related to Tax Incentives
Empire State Development should scrutinize any possible abatements based on whether projects would not be feasible without a specific PILOT discount amount to ensure they support economic growth.
The City and State should ensure that abatements are based primarily on promoting economic growth rather than other factors.
The Penn Station area plan should not set a precedent for future rezonings or financings that bypass standard City-led processes.
Key Data
10-year
— The duration of the property tax lookback period used to calculate make-whole payments to the City.
3%
— The annual escalation rate applied to the make-whole payments for property tax diversion.
Reforming the property tax system and implementing appropriate tax incentives are essential steps to make the development of all housing types across the city financially feasible. These measures, alongside broader zoning changes, are necessary to address the city's housing affordability crisis and encourage mixed-income development.
Recommendations related to Tax Incentives
The City should implement property tax reform and the right tax and other incentives to encourage mixed-income development.
The City should reform the property tax system in order to make housing less expensive to build and operate.
The proposed Penn Station Area project relies on complex value capture financing, specifically payments in lieu of property taxes, which risks diverting future City revenue to State capital needs without sufficient local control. To ensure fiscal responsibility, the City and State must collaborate on a transparent financing plan that mitigates the risks of high costs and potential overruns associated with the station's renovation and expansion.
Recommendations related to Tax Incentives
Before any financing plan is approved, the scope of work should be reasonably detailed, scrutinized, and streamlined to ensure the most cost-effective use of resources.
The State and the railroads should focus on improving safety, circulation, and functionality while avoiding costly, non-essential, cosmetic improvements.
The State must evaluate how it will manage and mitigate the financing risks inherent to value capture projects, including responsibility for interest payments and cost overruns.
The Mayor and City Council should guide whether and how much of the City’s future property tax revenue should be dedicated to specific needs instead of other priorities like public safety, education, or housing.
Empire State Development and the City must work together to develop a financing plan and a rezoning that makes sense for all New Yorkers.
Key Data
$6 to $7 billion
— Estimated cost just for the renovation of Penn Station.
$12 billion-plus
— Estimated cost for the expansion of Penn Station.
New York's Unemployment Insurance Trust Fund is currently insolvent, with over $8 billion in debt to the federal government that is not expected to be repaid until 2027. To address this, the state could use tax revenues or federal aid to pay down the debt or provide targeted tax credits to small businesses, though these actions would require diverting funds from other public services.
Recommendations related to Tax Incentives
The State could provide additional targeted relief to small- and mid-sized employers through business tax credits that offset higher UI tax payments.
Lawmakers could rapidly pay off the debt using State revenues, which would provide immediate tax relief to employers.
The State could partially accelerate repayment of the debt using State revenues to reduce the time needed for the Trust Fund to return to a positive balance.
Lawmakers should consider reforming the UI system to ensure it is better equipped to meet claims during economic downturns and not be forced to borrow from the federal government regularly.
Key Data
$8.1 billion
— Total outstanding UI debt owed to the federal government as of June 7, 2022.
$110 million
— Interest accumulated on UI debt for the federal fiscal year 2022.
$2.65 billion
— Balance of the UI Trust Fund in February 2020, prior to the pandemic.
0.6 percent
— Net effective federal tax rate for states without outstanding debt owed to the federal government.
3.6 percent
— Average state UI rate on employers in 2021.
$1,393
— Projected annual per employee tax by 2025 for employers with high experience ratings.
To meet the needs of its growing population, New York City must permit more than 50,000 housing units annually, a significant increase from recent years. Achieving this goal requires a comprehensive strategy that includes zoning reform, streamlined approval processes, and property tax reform alongside targeted incentives to encourage mixed-income development.
Recommendations related to Tax Incentives
The city must implement property tax reform and the right tax and other incentives to encourage mixed-income development to make the development of all housing types financially feasible.
The city should increase development opportunities by granting bonuses for affordable housing as part of the Zoning for Housing Opportunity proposal.
Approving a successor to the 421-a tax incentive program is essential to maintain rental housing production, as ending the program without a replacement would yield less than $100 million annually and fail to free up $1.8 billion for decades. The proposed 485-w replacement program should be modified to better incentivize production in moderate-to-middle-income neighborhoods while increasing transparency and public reporting.
Recommendations related to Tax Incentives
State lawmakers should approve a successor to the 421-a program to ensure the city’s rental housing does not grow scarcer and more expensive.
The proposed 485-w replacement program should be modified to incentivize more production in moderate-to-middle-income neighborhoods, require greater transparency and public reporting, and harmonize with existing State and City affordable housing programs.
State and City officials should take action to reform the property tax.
Key Data
less than $100 million
— Annual revenue generated over the next seven years if the 421-a program is ended without a successor.
$1.8 billion
— Amount of funding that will not be freed up for decades to come if the 421-a program is ended without a successor.
Ending the 421-a tax exemption will not immediately free up $1.8 billion in revenue because most projects receiving the benefit would not have been built without it, and existing exemptions will continue for decades. To boost housing production, the city should implement a successor to 421-a alongside policies that reduce construction costs, increase as-of-right zoning, and reform the property tax system.
Recommendations related to Tax Incentives
New York City needs to create a successor to 421-a as a key component of a broader package of policies and programs needed to boost housing production.
The city should implement policies to reduce construction and operating costs to improve housing affordability.
The city should increase as-of-right zoning capacity to help catch up to past population and job growth.
The city should prioritize reforming the property tax as part of a broader package of policies to boost housing production.
Key Data
$123 million
— Estimated 'mini tax' property taxes that 421-a properties will pay for fiscal year 2023.
$1.7 billion
— Value of 421-a exemptions expected for 60,149 tax lots in the upcoming fiscal year.
$1.74 billion
— Total exemption value for 421-a properties reported in the fiscal year 2023 tentative assessment roll.
$1.65 billion
— Amount of foregone tax revenue in fiscal year 2029.
$451 million
— Average annual 'available' tax revenue from fiscal year 2030 to fiscal year 2036.
$700 million
— Amount of exemptions still in force in fiscal year 2043.
New York's film tax credit, which was recently extended for three years, fails to provide commensurate economic impact and should be phased out. While the state has made progress in transparency by codifying a database of economic development deals, further reforms are needed to ensure accountability and better results from economic development spending.
Recommendations related to Tax Incentives
The film tax credit should be phased out and ultimately eliminated as it does not provide commensurate economic impact.
The state should bolster the Database of Deals to ensure it is appropriately comprehensive in its implementation.
The state should compile a unified economic development budget to improve transparency.
The state should pursue other programmatic reforms to improve economic development results.
Public funding for a new Buffalo Bills stadium, which could exceed $1 billion, requires a rigorous, transparent analysis to ensure that projected public benefits actually exceed the costs. Past research indicates that sports facilities rarely generate significant, consistent economic growth, necessitating that any proposed subsidies include private investment requirements and clawback provisions.
Recommendations related to Tax Incentives
All economic development spending, whether direct, through tax incentives, or through reduced utility or other costs, should be justified by a rigorous analysis that shows that the public benefits that would accrue will exceed the public’s costs.
As part of shaping any policy to publicly subsidize a capital investment, these impacts and their level should be quantified.
If a State subsidy is proposed, these impacts should be identified and used in a rigorous, transparent analysis that shows the incremental benefits will exceed the subsidy’s cost.
The State should transparently provide an analysis that identifies the benefits and full costs for any proposed subsidy.
Any subsidy should be after private investment and include clawback provisions.
Key Data
$1 billion
— Potential public funding sought by the team's owners for new stadium construction.
$862 million
— Estimated cost to renovate the existing Highmark Stadium.
$1.4 billion
— Low-end estimate for the cost of building a new stadium.
$1.7 billion
— High-end estimate for the cost of building a new stadium.
$350 million
— Additional cost for a stadium located in downtown Buffalo due to site acquisition.
$27 million
— Estimated annual fiscal impact in tax revenue generated by the presence of the Bills.
The 421-a property tax exemption is essential for making rental housing development financially feasible in New York City, as high construction and operating costs otherwise render most projects unviable. Replacing this program requires a well-crafted successor that is available as-of-right and maximizes production of both market-rate and affordable units to prevent the city's housing supply from becoming even scarcer and more expensive.
Recommendations related to Tax Incentives
State lawmakers should authorize an as-of-right tax exemption designed to foster rental housing development, minimize disruption of land and development markets, and help the City meet its affordable housing production goals.
The City should modify the proposed ANNY program to increase the amount of affordable and market rate rental development by better tailoring affordability options to reflect different market conditions.
The City should ensure greater transparency and public reporting of data to support a robust assessment of the program’s impact and effectiveness, which would inform any successor program.
The City should harmonize the City and State affordable housing programs and reduce bureaucratic conflicts and red tape to yield more development and speed up the development process.
The City should require developers to submit a simple, non-binding declaration of intent to use the tax incentive earlier in the process, such as when they start the housing lottery process with HPD.
Key Data
75%
— The increase in rent required to generate a reasonable rate of return for a new development project without the 421-a tax exemption.
$9,800
— The monthly rent needed to generate a 5% yield on cost for a new development in Manhattan without the 421-a tax exemption.
$6,125
— The monthly rent needed to generate a 5% yield on cost for a new development in Brooklyn and portions of Queens without the 421-a tax exemption.
30%
— The percentage of rental income that goes to property taxes in New York City, compared to 13% elsewhere in the country.
50%
— The amount by which the cost to operate a multifamily building in New York City exceeds the national average.
60% to 65%
— The percentage of gross rental income spent on expenses for fully taxed rental buildings in New York.
New York State spends $10 billion annually on economic development programs, yet fails to rigorously evaluate their effectiveness or demonstrate sufficient results. To improve oversight and management, the state should implement a unified budget, standardize performance metrics, and require private investment for all subsidized projects.
Recommendations related to Tax Incentives
The State should present a unified economic development budget so that New Yorkers know how much is really being spent.
The State should establish standardized metrics for economic development initiatives to identify the impact of each deal and program.
The State should improve its Database of Deals to publicly and regularly report on the cost, progress, and evaluation of all economic development initiatives statewide.
Program design should be improved by requiring private “skin in the game,” performance metrics, and penalties for non-performance for all project- or company-specific programs.
The State should improve oversight of economic development deals by restoring the Comptroller’s procurement oversight powers and increasing funding for the Authorities Budget Office.
Key Data
$10 billion
— Total annual cost of economic development programs in New York State in 2019.
8
— Number of criteria for a sound database met by the current Database of Economic Incentives.
20
— Total number of criteria for a sound database identified by watchdogs.
The Penn Station Area Civic and Land Use Improvement Project proposes a value capture framework using payments in lieu of taxes (PILOTs) and potential tax abatements to fund station renovations, though the plan currently lacks sufficient detail regarding financing and the City's role. Policymakers should ensure that any tax incentives or abatements are evaluated within the context of broader economic conditions and that the City maintains a substantive role in the planning process.
Recommendations related to Tax Incentives
New York City should have a substantive role in the planning process and should be a partner that agrees to the use of tax revenue that would otherwise flow to the City’s general fund.
There should be a robust discussion about potential tax incentives or abatements for redevelopment projects in the GPP district.
As with all economic development projects, discretionary tax abatements should be considered in context to account for broader economic conditions.
Empire State Development should provide additional information to answer questions regarding the scope of capital improvements and the estimated cost for each phase before proceeding with the GPP.
The plan should avoid costly, non-essential cosmetic improvements and should not preclude the possibility of future capacity or service enhancements.
Key Data
$17 billion
— The reported cost for the entire Penn Station project, including renovation, expansion, land acquisition, demolition, and public space improvements.
$6 to $7 billion
— The estimated cost of a scaled back renovation project without the proposed Penn South expansion.
$1.3 billion
— The amount included in the State’s Fiscal Year 2022 Enacted Budget for Penn Station-related projects.
50 percent
— The anticipated share of the project funding to be covered by the federal government.
25 percent
— The anticipated share of the project funding to be covered by New Jersey.
25 percent
— The anticipated share of the project funding to be covered by New York.
Managing the City’s fiscal crisis well will be a critically important duty of the next Mayor and a primary determinant of how the city survives the current crisis, and ultimately thrives in the future. Managing NYC’s Fiscal Crisis: A CBC Mayoral Candidate Forum featured a 10-minute conversation with each candidate,…
New York State has allocated $7.8 billion in film and television tax incentives since 2004, yet the program has failed to produce sufficient value and should be eliminated to help stabilize state finances. Given the current $9 billion budget gap and projected annual deficits reaching $19 billion by fiscal year 2023, the state should prioritize fiscal responsibility by phasing out or significantly reducing these credits.
Recommendations related to Tax Incentives
The State should stop awarding from future year allocations to ensure that caps effectively limit state liability.
The State should stop spreading claims over 3 years to reduce the extended distance between job creation and state financial impact.
The State should decrease the credit substantially to 10 percent of qualified costs and eliminate the annual cap to reduce program costs.
The State should further decrease the share of expenses that can be claimed in New York City to push production to areas with greater economic development needs.
The State should eliminate the film tax credit because it has not produced enough value for New Yorkers.
Key Data
$7.8 billion
— Total amount allocated in tax incentives to the film and television industry since 2004.
$9 billion
— Current budget gap facing New York State.
$19 billion
— Projected annual deficits in fiscal year 2023.
$420 million
— Annual cap on the film tax credit through 2025.
9.7 percent
— Unemployment rate in New York State at the time of the report.
$12 million and $15 million
— Annual amount collected by Saturday Night Live between 2015 and 2018.
New York State's fiscal policies, including various tax incentives, currently encourage fossil fuel consumption, undermining the state's climate goals set in the Climate Leadership and Community Protection Act. By aligning these policies with environmental objectives—such as limiting sales tax exemptions to renewable energy and excluding fossil fuel-reliant systems from investment tax credits—the state could potentially save over $800 million annually.
Recommendations related to Tax Incentives
New York could limit its sales tax exemptions on residential energy, which currently apply to fossil fuels, to zero-emission fuels and renewable energy sources.
The state could also tailor existing tax incentives to incorporate renewable energy; economic investment tax credits could exclude heating systems that rely on fossil fuels.
Key Data
$800 million
— Potential annual savings for the state from adjusting fiscal policies and tax incentives to align with environmental goals.
$200 million
— Amount spent by New York on utilities, such as heating and cooling, in fiscal year 2019.
7,000
— Number of government fleet vehicles that could be converted to electric to accelerate the transition to clean transportation.
New York State provides over $800 million in annual tax exemptions that reduce the cost of consuming fossil fuels, which undermines the state's climate goals. To better align with the Climate Leadership and Community Protection Act, the state should reform these tax expenditures and direct spending programs to incentivize renewable energy and discourage fossil fuel reliance.
Recommendations related to Tax Incentives
The State could limit the residential energy sales tax exemption only to zero emission fuels and renewable energy sources and target benefits to sources that support CLCPA goals.
The State could lower, or gradually eliminate, the sales tax exemptions on fossil fuel-based residential energy sources.
The State could consider providing financial support to low-income households to enable them to afford switching to clean heating sources.
The State also could consider eliminating exemptions for fossil-fuel based energy used for non-residential purposes, such as research and development.
The State could eliminate the sales tax cap on motor fuel, which would increase the price at the pump, reduce consumption, and bring in some of the approximately $85 million in foregone State revenue.
The State could explore tailoring tax credit programs to create incentives to incorporate renewable energy into program projects.
Investment tax credits could exclude heating systems that rely on fossil fuels.
Key Data
$800 million
— Annual tax exemptions provided by New York State that reduce the cost of consuming fossil fuels.
$85 million
— Foregone State revenue from the sales tax exemption on the cost of gasoline that exceeds $2 per gallon.
$369 million
— Fiscal impact of a partial repeal of the sales tax on residential energy, leaving exemptions for electricity, wood, and renewables.
$177 million
— Fiscal impact of repealing the petroleum business tax on residential heating.
$161 million
— Current program cost of the Excelsior Jobs Program Investment Tax Credit.
$211 million
— Current program cost for property sold to contractors for capital improvements or repairs for exempt organizations.
New York should phase out the film tax credit by gradually reducing eligible expenses and evaluate the cost-effectiveness of the Excelsior Jobs program before approving any long-term extensions. These measures would ensure that state tax incentives are fiscally responsible and provide measurable economic benefits rather than serving as indefinite subsidies.
Recommendations related to Tax Incentives
The State should further reduce the film tax credit by decreasing the share of eligible expenses in 5 percentage point increments until it is completely phased-out.
The State should evaluate the cost-effectiveness of the Excelsior Jobs program before granting a long-term extension and expanding the program.
Key Data
$7.3 billion
— Total authorized subsidies to the film and television industry since the enactment of the State film tax credit in 2004.
$420 million
— The amount by which the total allocation for the film tax credit is increased in the Executive Budget.
15 years
— The duration of the proposed extension for the Excelsior Jobs Tax Credit program.
30 percent to 25 percent
— The proposed decrease in the share of expenses that may be granted as a refundable film tax credit.
New York City's high property tax rates on multifamily rental buildings complicate new construction, necessitating complex and expensive tax incentives to make projects financially viable. Reforming the property tax system is essential to facilitate rental housing development without relying on substantial subsidies.
Recommendations related to Tax Incentives
City and State lawmakers should prioritize reforming New York City’s property tax system to make it easier to build rental housing without the need for substantial subsidies.
Key Data
920,000
— renter households in New York City that were rent burdened, paying at least 30 percent of their incomes in rent.
22%
— of all housing units produced in 2017 that were accounted for by 40-plus story buildings.
23%
— of units in 40-plus story buildings that were income-restricted.
The Opportunity Zone program, while intended to spur investment in low-income areas, risks significant revenue losses for New York State and City without clear evidence of added public benefit. To address these concerns, the state should implement stricter transparency and reporting requirements or consider decoupling from the federal tax incentive program entirely.
Recommendations related to Tax Incentives
The State can require Opportunity Funds operating in New York State to report on their activity in order to qualify for state tax benefits.
The State could require funds to report annually on the value of gains invested by New York State taxpayers in qualified opportunity funds.
The legislature could pass a bill that would limit benefits to residential projects that meet a minimum affordability threshold for a fixed set of time or to commercial projects that are consistent with an REDC strategic plan.
The State could limit benefits to zones that meet both the poverty and family income thresholds, or to those that meet the criteria based on the most recently available Census data.
The legislature could decouple fully from the federal program, as there is no requirement that New York State conform to the tax benefits offered by the OZ program.
Key Data
$63 million
— Annual revenue loss for New York State due to the Opportunity Zone program.
$31 million
— Annual revenue loss for New York City due to the Opportunity Zone program.
$2 billion
— Estimated annual cost of the Opportunity Zone program to the federal government.
$6 trillion
— Estimated amount of unrealized capital gains held by taxpayers nationally.
$9.4 billion
— Total cost of the Opportunity Zone program for federal tax years 2018 to 2022.
$53 billion
— Amount of capital that funds intend to raise to invest in Opportunity Zone projects as of August 2019.
The 2019 Economic Development Sweetener Scorecard tracks 67 legislative bills aimed at providing various tax incentives, grants, and loans to businesses across New York State. These proposed measures include significant fiscal commitments, such as $440 million for the Excelsior Linked Deposit Program and $275 million to expand the School Tax Relief (STAR) property tax exemption to small businesses.
Key Data
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program, with $200 million dedicated to business startups.
$275 Million
— Fiscal impact of making real property owned by small businesses with 100 employees or fewer eligible for the STAR property tax exemption.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Annual cap for the new tax credit for music and video game production industries.
$65 Million
— Increase in funding for the Excelsior Linked Deposit Program.
$30 Million
— Fiscal impact of increasing the credit per eligible farm employee under the Farm Workforce Retention Credit.
The 2019 Economic Development Scorecard tracks 69 legislative bills proposing various tax incentives, grants, and economic development programs across New York State. These initiatives aim to support diverse sectors ranging from manufacturing and agriculture to small businesses and technology startups through tax credits, loan programs, and property tax exemptions.
Key Data
$275 Million
— Fiscal impact of the proposed School Tax Relief (STAR) property tax exemption for small businesses with 100 employees or fewer.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Annual cap for the new tax credit for music and video game production industries.
$30 Million
— Fiscal impact of the Farm Workforce Retention Credit, which increases the credit per eligible farm employee.
$10 Million
— Fiscal impact of the GrowNY pilot program, which provides annual grants for technical assistance to growing businesses.
$8.25 Million
— Fiscal impact of the Capital Investment Jobs Retention Program, a refundable tax credit for businesses making significant capital investments.
The Amazon headquarters deal in Long Island City involves $2.8 billion in state and city tax breaks and grants, highlighting significant flaws in current economic development strategies. Future policy should prioritize legislative oversight, cap wage-based benefits, and reevaluate outdated tax expenditure programs to ensure public funds are used effectively.
Recommendations related to Tax Incentives
The Legislature should closely scrutinize an increase in the cap of the Excelsior Jobs Program.
A cap to the level of wages eligible for the Excelsior credit should be considered.
State capital funding is best invested in general infrastructure, not for the direct benefit of an individual company.
City tax expenditure programs should be narrowed or eliminated to ensure benefits are only spent to induce job creation that would not otherwise occur.
Capital investment should go through the regular budgetary process.
Key Data
$2.5 billion
— Amazon announced a $2.5 billion investment that includes the construction of headquarters in Long Island City.
$1.5 billion
— New York State has offered more than $1.5 billion in tax breaks and grants.
$1.3 billion
— New York City has offered $1.3 billion in benefits.
$2.8 billion
— Total of $2.8 billion in state and city benefits offered to Amazon.
$3.5 billion
— State and city incentives could increase to a combined $3.5 billion if Amazon creates 40,000 jobs and up to 8 million square feet of office space.
The incentive package for Amazon's Long Island City headquarters, totaling between $2.8 billion and $3.5 billion, highlights significant flaws in current economic development policies, including the expansion of tax programs for single companies and the use of as-of-right incentives. These programs should be reevaluated to ensure public funds are used for broad infrastructure improvements rather than direct corporate subsidies.
Recommendations related to Tax Incentives
The state should ensure that programs like the Excelsior Jobs Program are not expanded to accommodate the needs of a single company, as this sets a concerning precedent.
Policymakers should implement caps on the level of wages eligible for reimbursement under the Excelsior jobs program to minimize the state's financial exposure.
State capital funding should be invested in general infrastructure rather than being used for the direct benefit of an individual company.
Amazon should pay the full value of the PILOT directly to the City rather than diverting some funds to the surrounding neighborhood.
New York City’s as-of-right tax incentives, such as REAP and ICAP, should be evaluated and potentially narrowed or eliminated to ensure benefits are only spent to induce job creation that would not otherwise occur.
Key Data
$1.2 billion
— Maximum Excelsior tax credits Amazon could receive over the 2019-2028 period.
$505 million
— Maximum ESD capital grant available to Amazon for office build-out and infrastructure improvements.
$386 million
— Estimated total value of the ICAP property-tax abatement for the Amazon project.
$900 million
— Potential total REAP credit by 2039 assuming the creation of 25,000 jobs.
$2.8 billion
— Total benefits available to Amazon from New York State and City if 25,000 jobs are created.
$3.5 billion
— Total benefits available to Amazon from New York State and City if 40,000 jobs are created.
New York State has allocated over $28 billion to economic development since fiscal year 2012, with $18.7 billion dedicated to tax expenditures for firms committing to job creation or capital investment. These incentives, alongside corporate tax reforms and phased-in reductions for manufacturers, represent a significant portion of the state's economic strategy during the Cuomo administration.
Key Data
$28 billion
— Total state allocation to economic development between fiscal year 2012 and fiscal year 2019.
$18.7 billion
— Total amount of tax expenditures for firms that commit to create or retain jobs or make significant capital investments.
$8 billion
— Total spending allocated by the Department of Economic Development and the Empire State Development Corporation between fiscal years 2012 and 2019.
$750 million
— Incentive amount awarded to the Tesla SolarCity factory project.
$276 million
— Incentive amount awarded to the Moynihan Station development.
$500 million
— Amount allocated to Central New York, the Finger Lakes, and the Southern Tier under the Upstate Revitalization Initiative.
Numerous legislative proposals to expand economic development programs, including various tax credits and grants, would create significant fiscal impacts if enacted. Vetoing these measures is necessary to avoid unnecessary spending and maintain fiscal discipline.
Recommendations related to Tax Incentives
The Governor should veto the ten bills that expand economic development programs to prevent unnecessary fiscal strain.
State leaders should reject new tax credit expansions that lack clear economic justification or measurable return on investment.
Policymakers should refrain from creating new targeted economic development programs that increase the state's fiscal burden.
The state should prioritize fiscal discipline by vetoing legislation that expands existing tax incentive programs.
The Governor should veto bills that authorize new grants and flexible financing programs for specific industries.
Key Data
$7 Million
— Annual cap for the Empire State Commercial Production Tax Credit.
$1.5 Million
— Fiscal impact of the proposed Microenterprise Development Fund.
$65 Million
— Proposed increase for the Excelsior Linked Deposit Program.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 Million
— Annual cap for the music and video game production tax credit.
$25 Million
— Annual cap for the video game production tax credit.
The Governor is urged to reject ten specific economic development bills that would create or expand various tax incentives and grants. These proposals, which target specific industries and regions, represent a significant fiscal commitment that complicates the state's economic development strategy.
Recommendations related to Tax Incentives
The Governor should reject the ten economic development bills identified in the report to prevent unnecessary fiscal expansion.
Policymakers should refrain from creating new targeted tax incentives that favor specific industries over broad economic growth.
The state should avoid expanding existing tax benefit programs to include additional sectors or retail projects.
Legislators should scrutinize the fiscal impact of proposed economic development programs before advancing them.
The state should prioritize broad-based economic policies rather than relying on a complex web of targeted tax credits and exemptions.
Key Data
$440 million
— Proposed increase in total funding for the Excelsior Linked Deposit Program.
$140 million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$100 million
— Annual cap for the music and video game production tax credit.
$25 million
— Annual cap for the video game production tax credit.
$7 million
— Annual cap for the Empire State Commercial Production Tax Credit.
$2.5 million
— Appropriation for the I Love NY Outdoor program.
New York State legislators introduced numerous bills in 2018 aimed at fostering economic development through various tax credits, exemptions, and grant programs targeting specific industries like manufacturing, technology, and small businesses. These legislative proposals sought to incentivize job creation, support startups, and provide financial relief to sectors ranging from agriculture to film and video game production.
Key Data
$7 Million
— Annual cap for the Empire State Commercial Production Tax Credit through 2023.
$1.5 Million
— Fiscal impact of the proposed Microenterprise Development Fund.
$1-$2 Million
— Estimated fiscal impact of the Small Business Innovation Research Program outreach and counseling.
$65 Million
— Proposed increase for the Excelsior Linked Deposit Program.
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program.
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
This economic development scorecard catalogs numerous legislative proposals and bills in New York that utilize tax credits, exemptions, and financial incentives to stimulate growth across various industries and small businesses. The initiatives detailed include significant funding increases for existing programs like the Excelsior Linked Deposit Program and the creation of new targeted tax incentives for sectors ranging from manufacturing to agriculture.
Key Data
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program.
$200 Million
— Funding dedicated to business startups within the Excelsior Linked Deposit Program.
$20 Million
— Fiscal impact of the HIRE NY act, which provides loans for microbusiness hiring.
$10 Million
— Fiscal impact of the GrowNY pilot program, an economic gardening initiative.
New York state legislators have introduced numerous bills aimed at economic development, many of which utilize tax incentives, credits, and exemptions to support small businesses, manufacturing, and specific industries. These proposals range from expanding existing programs like the Excelsior Linked Deposit Program to creating new targeted initiatives for sectors such as agriculture, technology, and microbusinesses.
Key Data
$140 Million
— Fiscal impact of extending the zero-percent Corporate Franchise Tax rate to qualified pass-through manufacturers.
$440 Million
— Total funding increase for the Excelsior Linked Deposit Program.
$200 Million
— Amount of the Excelsior Linked Deposit Program funding dedicated to business startups.
$10 Million
— Fiscal impact associated with the GrowNY pilot program.
$20 Million
— Fiscal impact of the HIRE NY act providing loans for microbusiness hiring.
$2 Million
— Fiscal impact of the Transitional Green Development Program.
The proposed fiscal year 2019 budget includes several tax-related measures, such as a deferral of business tax credits and a new tax on for-profit health insurance companies, which warrant careful reconsideration or repeal. Additionally, the state should eliminate the inefficient School Tax Relief (STAR) program to save $3.4 billion annually and ensure online retailers collect sales tax on all transactions.
Recommendations related to Tax Incentives
The State should repeal the proposed three-year deferral of business tax credits for taxpayers claiming more than $2 million in aggregate credits, or pay the credits as scheduled.
The State should reject the proposed health insurance windfall tax on for-profit health insurance companies, as there is no legitimate justification for targeting this specific industry.
The State should repeal the School Tax Relief (STAR) program entirely, as it is a poorly designed program that drives excessive benefits to wealthy taxpayers.
Online retailers that have a physical presence in New York State should be required to collect sales tax on the sale of their products, regardless of the intricacies of how those sales are arranged.
Changes to the State tax code regarding the capping of the State and Local Tax (SALT) deduction should be deliberated carefully and considered outside the budget process.
Key Data
$2 million
— Threshold for taxpayers subject to the proposed three-year deferral of business tax credits.
$3.4 billion
— Annual savings the State would realize if the School Tax Relief (STAR) program were repealed entirely.
$1.2 billion
— Annual cost of the property tax rebate based on an owner's STAR savings.
$750 million
— Revenues included in the Fiscal Year 2019 Financial Plan attributable to the conversion of nonprofit health insurance companies to for-profit status.
The proposed state budget provision allowing the Metropolitan Transportation Authority to create tax increment financing districts in New York City without local approval undermines municipal autonomy and lacks essential safeguards like sunset clauses or revenue segregation. This approach risks diverting funds from essential city services and fails to adhere to standard best practices for value capture financing.
Recommendations related to Tax Incentives
The State and the MTA should use the powers granted to them under the existing TIF law to partner with New York City when considering the use of value capture for future projects.
TIF districts should sunset after a period of time, after which the incremental revenue flowing to the district reverts to a city’s general fund.
Incremental revenue should be segregated to repay the costs of the projects that created the value.
Key Data
$100 million
— Minimum estimated cost for capital projects to be eligible for the creation of a transportation improvement subdistrict.
75 percent
— Maximum amount of tax increment revenue the City would be required to remit to the MTA.
one mile
— Distance from an MTA capital project within which the MTA could capture property tax revenue.
one-half mile
— Industry-standard buffer for transit zones, which is significantly smaller than the proposed one-mile district size.
The state should freeze over $3.2 Billion in proposed economic development and business subsidy spending until critical anti-corruption and transparency reforms are enacted. These reforms include requiring competitive contracting, centralizing grant management under the Empire State Development Authority, and creating a comprehensive database to track subsidy deals and clawback provisions.
Recommendations related to Tax Incentives
Require competitive and transparent contracting for the award of state funds including authorities and affiliates.
Have the Empire State Development Authority (ESD) award all state economic development grants and contracts.
Empower the Comptroller to pre-approve all SUNY and OGS central contracts over $250k.
Prohibit all state-affiliated entities from doing business with their boards of directors.
Create a Database of Deals that shows the total value of subsidies awarded to a business, including job targets and “clawback” provisions.
Explore options to limit campaign contributions from anyone seeking a state contract to reduce potential conflicts of interest.
Key Data
$3.2 Billion
— New proposed spending in the Executive Budget on economic development and business subsidies.
$250k
— Threshold for Comptroller pre-approval of all SUNY and OGS central contracts.
$1 Billion
— Amount of state economic development contracts involved in alleged rigging.
New York allocates over $4 billion annually to economic development, yet the state lacks a unified budget and systematic reporting for these subsidies, often funding projects without clear criteria or guaranteed returns. To improve accountability, the state should implement reforms such as establishing a unified budget, standardizing performance metrics, and ensuring incentives are only awarded after employers fulfill their job creation promises.
Recommendations related to Tax Incentives
Establish a unified economic development budget to improve transparency and oversight of state spending.
Standardize metrics across all economic development initiatives to allow for accurate comparisons between programs.
Establish a database of deals outlining every economic development incentive, including beneficiaries and private commitments.
Improve program design so that incentives are only provided after an employer has fulfilled its promises regarding job creation or capital investment.
Adopt administrative reforms to ensure procurement integrity within the state's economic development process.
Key Data
$4 Billion
— New York state's annual allocation to economic development, which includes tax benefits.
$1 Billion
— Amount of taxpayer money allocated to "silver-bullet" projects before a single new job was created.
$83 Million
— State investment in a factory for an LED light company in DeWitt that ultimately failed to lure the business.
$15 Million
— Additional taxpayer cost to properly equip the DeWitt factory for a new tenant.
$337,931
— Cost per job for the new company in DeWitt, based on the promise of 290 jobs.
$30,000
— Annual subsidy per job per year for the DeWitt project, assuming the jobs last for 10 years.
$3.2 billion -- how much New York City spent on economic development in 2016, including tax expenditures, operating costs, and capital spending. NYCEDC President and CEO James Patchett joins the podcast to discuss the City's development strategy, tax breaks, NYC Ferry and the BQX project.
The New York state Film Tax Credit program should be repealed, though the state will not realize immediate financial savings due to existing rollover provisions and multi-year claim requirements. Because the state has already allocated credits for future years, the budget will not see the full benefits of repealing this wasteful tax incentive for at least four years.
Recommendations related to Tax Incentives
The state should repeal the New York state Film Tax Credit program.
The state should pursue the timely repeal of this wasteful credit to ensure financial benefits are realized as soon as possible.
Key Data
$420 million
— Annual cap of the New York state Film Tax Credit program.
$5 million
— Threshold for companies claiming credits to spread the claim over three years.
$6 million
— Example of a movie credit awarded in 2017 from the 2019 allocation.
Tax Increment Financing (TIF) allows municipalities to fund infrastructure projects by capturing future property tax revenue, but it carries significant risks including the potential to divert funds from general budgets and shift economic activity rather than creating it. To protect taxpayers, governments should rigorously evaluate proposed projects using a checklist that assesses the necessity of the incentive, the net economic impact, and the project's financial viability.
Recommendations related to Tax Incentives
Governments should ensure that any proposed TIF project passes the 'but for' test to confirm that development would not occur without the TIF-funded capital improvements.
Policymakers must evaluate whether a TIF investment will generate new economic activity rather than simply shifting existing activity from elsewhere.
Cities should determine if a project's expected return on investment is strong enough to justify diverting revenue from other prospective needs.
Governments must assess whether a TIF district will generate sufficient revenue to repay debt service and other costs, and establish a plan for covering potential shortfalls.
Officials should consider whether general obligation bonds are a better option than TIF bonds, which are riskier and more costly.
Key Data
$359 million
— The amount New York City paid from its general fund to subsidize Hudson Yards’ interest payments after the Great Recession.
$14 million
— The amount of TIF debt the Troy Downtown Development Authority in Michigan defaulted on.
$75.4 million
— The total outstanding Pilot Increment Financing (PIF) debt in New York as of June 2017.
$3 billion
— The cost of the Hudson Yards project, which was financed through public investments and actions.
$266 million
— The amount of capital cost overruns incurred by the Hudson Yards project.
$10 million
— The amount that a majority of Chicago's TIF districts raised and spent over a 13-year period.
New York State should refrain from approving new economic development programs, including new tax credits, until existing spending is properly evaluated and comprehensive reforms are implemented. The state currently spends $5 billion on these programs, and history shows that narrowly focused incentives often grow significantly beyond their initial caps, as seen with the Film Tax Credit Program.
Recommendations related to Tax Incentives
The Governor should veto the three bills that would expand the State’s economic development programs.
No new programs should be approved until reforms are put in place to improve evaluation, procurement, and disclosure requirements.
No new programs should be approved until existing spending is effectively evaluated.
Any new spending or tax programs should be considered in the context of an overall budget and financial plan.
Narrowly focused economic development incentives should be curtailed because they do not provide a return on investment.
Key Data
$5 billion
— Annual state spending on economic development programs.
$100,000
— Maximum grant amount for small businesses supporting commercialization of innovative energy and environmental technology.
$5 million
— Annual cap for the proposed new refundable tax credit for companies that hire female and minority writers and directors.
$25 million
— Original annual cap for the Film Tax Credit Program when it was first adopted.
$420 million
— Current annual cost of the Film Tax Credit Program.
Read original article here . Governor Andrew Cuomo is back in New York after a rare, overnight trip to California, fundraising with Hollywood executives whose industry has benefited from New York's $420 million film tax credit program. "It's a glamorous form of coporate welfare," said Ken Girardin, Empire Center analyst.…
New York's economic development tax incentive programs are the most expensive in the nation, costing $8.25 billion in 2015, yet research indicates these expenditures have little correlation with economic growth or job creation. To address these inefficiencies, the state should implement a moratorium on new spending while adopting a unified budget, standardized performance metrics, and greater transparency regarding incentive recipients.
Recommendations related to Tax Incentives
The State should implement a moratorium on new economic development spending until it increases transparency, establishes performance criteria to measure impacts, and enforces agreements to hold beneficiaries accountable.
New York should establish a unified economic development budget that captures state and local costs.
The State should use standardized metrics across all economic development initiatives.
New York should publish a database of deals to shine a light on recipients of incentives.
The State should improve program design to follow best practices and to reward actual performance.
New York should make administrative reforms to procurement and oversight rules.
Key Data
$45 billion
— Estimate of state and local economic development tax incentives cost to taxpayers in 2015.
$8.25 billion
— Amount New York awarded in economic development incentives in 2015.
2.5 times
— The factor by which New York's incentive use is higher than the national average.
3 states
— The number of states whose combined economic development incentive costs equal New York's costs.
To improve transparency and reduce conflicts of interest in state spending, officials should consolidate economic development awards under the Empire State Development Corporation and implement a public 'Database of Deals' to track all business subsidies. Additionally, oversight should be strengthened by requiring competitive contracting for state funds and empowering the comptroller to review all contracts exceeding $250,000.
Recommendations related to Tax Incentives
Require competitive and transparent contracting for the award of state funds by all state agencies, authorities, and affiliates.
Transfer responsibility for awarding all economic development awards to the Empire State Development Corporation (ESDC), and end awards by state non-profits and SUNY.
Empower the comptroller to review and approve all state contracts over $250k.
Prohibit state authorities, state corporations, and state non-profits from doing business with their board members.
Create a ‘Database of Deals’ that allows the public to see the total value of all forms of subsidies awarded to a business.
Limit campaign contributions from anyone who has or is seeking a state contract.
Key Data
$250k
— The threshold for state contracts that the comptroller should be empowered to review and approve.
six
— The number of states that have already implemented a 'Database of Deals' to track subsidies awarded to businesses.
On February 22, 2017, New York State Budget Director Robert Mujica presented highlights from the New York State Executive Budget for Fiscal Year 2018 to the Citizens Budget Commission.
New York City's property tax system relies on a complex array of exemptions and abatements that cost billions annually, with housing and economic development incentives totaling over $3 billion in 2016 compared to $350 million for personal exemptions. These policy decisions create significant disparities in effective tax rates, where small residential properties are sheltered from higher taxes at the expense of commercial and large rental buildings.
Key Data
$3 billion
— The total cost of housing and economic development tax exemptions granted in 2016.
$350 million
— The total cost of personal tax exemptions granted in 2016.
$429 million
— The cost of the coop and condo abatement program, which is the largest abatement program.
$85 million
— The cumulative reduction in property taxes from 96,000 abatements in 2016.
$28 million
— The value of abatements under the Industrial and Commercial Abatement Program in 2016.
15 percent
— The share of rental buildings that received a partial tax exemption in 2016.
New York's Regional Economic Development Councils have awarded nearly $4 billion in tax breaks and grants since 2011, yet most regions have failed to outperform national job growth benchmarks. Consequently, the state should shift focus from specific project-based incentives toward broader regulatory and tax reforms, infrastructure investment, and workforce education to better stimulate regional economies.
Recommendations related to Tax Incentives
The Regional Economic Development Councils should reassess their strategic plans and revise them with an eye toward investing in business sectors that are more likely to spur growth.
The state should pursue regulatory and tax reform to benefit employers throughout the region or state rather than aiding specific businesses or projects.
The state should prioritize enhanced career and technical education to improve economic outcomes.
The state should prioritize infrastructure investment that benefits employers throughout the region or state.
Key Data
$4 billion
— Total amount of tax breaks and grants awarded through the Regional Economic Development Councils to date.
$750 million
— Additional funding available for Regional Economic Development Council awards in 2016.
7.9 percent
— Total employment growth in New York State between 2010 and 2015.
656,801
— Number of jobs added in New York State from 2010 to 2015.
The proposed legislation to create new tax credits for music and digital gaming production, estimated to cost $150 million, should be vetoed because such narrowly focused incentives fail to provide a return on investment. Furthermore, tax policy with significant budget implications should be addressed within the context of comprehensive budget negotiations rather than through isolated bills.
Recommendations related to Tax Incentives
Governor Cuomo should veto A.10083-b/S.7485-b, which would create new tax credits for music and digital gaming media production.
The state should curtail, rather than expand, narrowly focused tax credits because they do not provide a return on investment.
Matters of tax policy that have significant budget implications should be dealt with in the midst of budget negotiations and an overall financial plan.
Key Data
$25 million
— Annual cost of the proposed music and digital gaming credits for the next three years.
$150 million
— Estimated total cost of the proposed music and digital gaming credits.
$25 million
— Original annual cap of the Film Tax Credit Program when it was first adopted.
$420 million
— Current annual cost of the Film Tax Credit Program.
New York City's tax-deferred compensation plan for teachers guarantees a 7 percent investment return, which costs taxpayers $1.2 billion annually due to the gap between this guarantee and actual market rates. This arrangement creates a significant financial burden and risks the viability of the teachers' pension system, necessitating reform to align the plan with market-based investment options.
Recommendations related to Tax Incentives
The most direct way to make the change would be to eliminate the TDA and transfer its assets and participants to OLR’s plan.
A more gradual change would be to require only newly hired teachers to use the OLR plan, but to reform the TDA plan serving current teachers and retirees.
The fixed income option should be converted to choices comparable to those offered in the OLR plan – a government bond fund and a corporate bond fund with returns based on prevailing interest rates.
Key Data
$1.2 billion
— The amount of the taxpayer subsidy for the TDA fixed return fund in fiscal year 2015.
$238 million
— The amount of the taxpayer subsidy for the TDA fixed return fund in fiscal year 2007.
7.0 percent
— The guaranteed interest rate on the TDA fixed fund option for most participants.
36 percent
— The portion of the total taxpayer contribution to the TRS QPP that the taxpayer subsidy equaled in 2015.
$18.7 billion
— The total amount of money in the TDA fixed fund in 2015.
The state's economic development program requires major reforms following a bid-rigging scandal that impacted over $1 billion in public funds. Proposed changes include centralizing the management of business subsidies, increasing transparency through a public database, and implementing stricter oversight to prevent conflicts of interest.
Recommendations related to Tax Incentives
Require competitive and transparent contracting for the award of state funds, regardless of the contracting entity.
Transfer responsibility for awarding all business subsidy awards to the Empire State Development Corporation (ESDC) and end the use of state non-profits and SUNY in awarding these subsidies.
Create a Database of Deals that allows the public to see the total value of all forms of subsidies awarded to a business.
Empower the Comptroller to review and approve all state contracts.
Reduce the potential for conflicts of interest by exploring options to limit campaign contributions from anyone who has or is seeking a state contract.
Key Data
$1 billion
— Amount of public funds affected by the scandal involving state contracts and subsidies.
six
— Number of states that currently have a Database of Deals to track subsidies awarded to businesses.
Nineteen
— Number of states and New York City that have 'pay to play' laws to limit campaign contributions from those seeking state contracts.
New York City's economic development tax expenditures grew from $1.6 billion in 2012 to $2.1 billion in 2016, necessitating a more rigorous evaluation process to ensure these programs effectively induce business investment rather than subsidizing activity that would occur regardless. Implementing regular reviews for all tax expenditures, including property tax abatements, is essential to improve oversight and terminate ineffective programs.
Recommendations related to Tax Incentives
The city should support the proposed legislation to create a regular evaluation process for economic development tax expenditures.
There is a need for more scrutiny of all tax expenditures as well as clearer standards for discretionary tax abatements.
The city should pursue the establishment of a similar evaluation process for other tax expenditures, such as property tax abatements intended to induce construction of housing.
The city should use evaluation results to inform the Council’s oversight and advocacy at the State and local level when evaluation identifies changes that would improve the effectiveness and efficiency of tax expenditure programs or indicates programs are ineffective and should be terminated.
Key Data
$1.6 billion
— Total economic development tax expenditures in 2012.
$2.1 billion
— Total economic development tax expenditures in 2016.
$2.8 billion
— Total tax expenditures identified by the City Council Taskforce on Economic Development Tax Expenditures.
The state should reject new tax credits like the Education Scholarship and Program Tax Credit and the Thruway Toll Tax Credit, while also halting expansions in economic development spending until existing programs are evaluated. Additionally, freezing the poorly targeted STAR program at current levels is recommended to curb rising costs.
Recommendations related to Tax Incentives
The Education Scholarship and Program Tax Credit (ESPTC) and the Thruway Toll Tax Credit (TTTC) should be rejected as they are inappropriate and unnecessary subsidies.
The extension of the Excelsior Jobs Tax Credits should be rejected.
A moratorium should be declared on expansions in economic development spending until the benefits of existing programs can be examined carefully and unsuccessful programs terminated.
The freeze of STAR benefits at current levels should be supported to stem the growth of this poorly targeted program.
Key Data
$3.4 billion
— Annual cost to state taxpayers for the STAR (School Tax Relief) program.
$70 million
— Total cap for the Education Scholarship and Program Tax Credit (ESPTC) program.
$340 million
— Cost of the Thruway Toll Tax Credit (TTTC) which encourages additional driving.
$1.5 billion
— Funding allocated for the Upstate Revitalization Initiative (URI).
The state budget includes $1.2 billion designated for the Family Tax Relief Credit and the Property Tax Freeze Rebate, both of which are set to expire in 2016. Future budget plans must address whether these tax rebates will be extended and how potential business tax credits related to minimum wage increases will be handled.
Key Data
$1.2 billion
— amount already designated for the Family Tax Relief Credit and the Property Tax Freeze Rebate, both of which expire in 2016
New York's Brownfield Cleanup Program has functioned primarily as a real estate development subsidy rather than an environmental initiative, with the tangible property tax credit accounting for 85% of total benefits. Between 2008 and 2013, the state issued $1.1 Billion in tax breaks for 115 sites, highlighting a need to restrict eligibility and better align incentives with actual environmental remediation costs.
Recommendations related to Tax Incentives
The state should implement further tightening of eligibility for the Brownfield Cleanup Program because the program has functioned more as a real estate development program rather than an environmental cleanup program.
Policymakers should better focus benefits on the cost of cleanup and environmental remediation rather than redevelopment credits.
The state should limit eligibility for the tangible property credit to projects located in high poverty or high unemployment locations, sites where cleanup costs exceed the property value absent contamination, and affordable housing projects.
Key Data
$1.1 Billion
— Total tax breaks issued by New York to clean up and redevelop 115 sites from 2008 to 2013.
85%
— Share of total Brownfield Cleanup Program benefits accounted for by the tangible property tax credit.
58%
— Amount by which the cost of the tangible property credit exceeded developers’ cost of site cleanup and groundwater remediation.
64%
— Share of total tax breaks accounted for by the top 10 projects.
$963 Million
— Total cost of the tangible property credit.
$609 Million
— Total cost of site cleanup and groundwater remediation.
New York's fiscal plan includes reforms to existing tax credit programs, such as tightening Brownfields eligibility and modifying the School Tax Relief (STAR) program to better target benefits. However, the budget also proposes new, potentially costly tax incentives like a property tax "circuit breaker" and an education tax credit, while continuing to fund questionable economic development programs that allow companies to operate tax-free.
Recommendations related to Tax Incentives
Proposed Brownfields tax credit reforms should be supported to tighten eligibility and better focus the program on the cost of cleanup and environmental remediation for sites in economically distressed areas.
The Executive Budget should be supported for improving the STAR program by providing a tax credit for new homeowners and disqualifying taxpayers in New York City making more than $500,000.
The proposed property tax "circuit breaker" credit should be modified because it is a large, new unfunded commitment, and instead, the state should repurpose existing resources to provide more targeted relief, such as further reforming the STAR program.
Proposals for excessive economic development spending, including extending Excelsior tax credits to entertainment companies, should be rejected and a moratorium declared on expansions in this area until the benefits of existing programs can be examined carefully.
The proposed education tax credit should be rejected because it creates an enhanced, potentially costly subsidy for private education that deviates from standard charitable contribution benefits.
Key Data
$3.4 billion
— Annual cost of the School Tax Relief (STAR) program.
$500,000
— Income threshold above which New York City taxpayers are disqualified from the STAR exemption benefit.
$1.7 billion
— Cost of the proposed property tax "circuit breaker" credit when fully phased in.
$100 million
— Total cap for the proposed education tax credit for the State.
75%
— Percentage of a contribution that taxpayers would receive as a credit under the proposed education tax credit.
The fiscal year 2016 Executive Budget proposes significant modifications to the School Tax Relief program and closes various tax credit loopholes, including those for Brownfields and Industrial Development Agencies. While these adjustments aim to better target benefits, the budget also includes a $1.7 billion income tax credit program that relies on aspirational surpluses, raising concerns about long-term fiscal commitments.
Recommendations related to Tax Incentives
The fiscal year 2016 Executive Budget should modify the School Tax Relief program to provide a tax credit for new homeowners, so taxpayers would bear the full burden of their school taxes directly, and school districts would gradually lose the state subsidy.
Reforms to the $500 million per year Brownfields Tax Credit should be implemented to encourage environmental remediation and better target benefits.
The state should implement a more stringent approval process for state tax breaks issued by local Industrial Development Agencies (IDAs).
The investment tax credit should sunset for financial services firms for which the investment incentive is no longer needed.
The Legislature should understand the aspirational aspect of the financial plan and refrain from adopting large, long-term spending commitments or tax reductions.
Key Data
$3.4 billion
— Annual cost of the School Tax Relief (STAR) program.
$500 million
— Annual cost of the Brownfields Tax Credit.
$1.7 billion
— Phased-in income tax credit, or 'circuit breaker' program, for taxpayers whose property taxes as a share of income reach 6 percent.
$11 million
— Tax breaks granted to The Late Show last year.
The FY2016 New York State budget process requires scrutiny regarding the expansion of economic development tax credit programs to ensure they provide clear, documented benefits. Additionally, the state must pursue sensible reforms to the Brownfields Tax Credit program following the Governor's recent veto.
Recommendations related to Tax Incentives
The state should evaluate whether the expansion of economic development tax credit programs is justified by clear, documented benefits.
The state should enact sensible reforms to the Brownfields Tax Credit program following the Governor's veto.
The State Tax Reform and Fairness Commission report proposes significant reforms to New York's tax structure, including tightening eligibility for major business tax incentives like the Investment and Film Tax Credits and increasing transparency regarding their beneficiaries. Additionally, the report identifies nearly $1.8 billion in sales tax exemptions that should be repealed or examined to improve fairness and efficiency.
Recommendations related to Tax Incentives
The State should reform the largest business tax incentive programs, specifically the Investment Tax Credit, the Film Tax Credit, and the Brownfields Tax Credit, by tightening eligibility.
The State should implement periodic reviews of the costs and benefits of business tax incentive programs to ensure effectiveness.
The State should mandate expanded transparency on which businesses benefit from tax incentive programs.
The State should repeal or examine almost $1.8 billion in sales tax exemptions that disproportionately benefit higher-income consumers.
Key Data
$2.6 billion
— The total amount of state tax incentives for businesses.
$180 million
— The annual savings projected from reforming the largest business tax incentive programs.
$1 billion
— The estimated cash receipt in fiscal year 2015 from deferred business tax credits.
$9 billion
— The total value of state sales tax exemptions.
$1.8 billion
— The amount of sales tax exemptions identified by the Commission that should be repealed or examined.
The proposed state budget increases economic development spending by over $800 million, including $420 million for film tax breaks, despite a lack of adequate controls for the $7 billion already spent annually on such initiatives. While the state should halt this unjustified expansion of subsidies, it should support the Governor's proposal to limit state sales tax breaks granted by local Industrial Development Agencies.
Recommendations related to Tax Incentives
The State should halt the unjustified expansion of economic development spending until it more systematically scrutinizes and justifies its subsidies for business.
The Legislature should support the Governor’s proposal to limit state sales tax breaks granted by local Industrial Development Agencies by requiring projects to meet the standards of the Excelsior program and have Regional Council approval.
Key Data
$800 million
— The amount by which the proposed budget increases spending for economic development activities.
$420 million
— The portion of the economic development spending increase allocated for film tax breaks.
$7 billion
— The amount currently spent annually in New York on economic development, which lacks adequate controls or data to prove the investments are worthwhile.
New York City's green policies, such as tax abatements for solar panels and green roofs, should be re-evaluated for cost-effectiveness to ensure they are not excessive compared to federal and state incentives. The city should prioritize policies like congestion pricing and sub-metering, which align environmental goals with economic competitiveness and consumer responsibility.
Recommendations related to Tax Incentives
The additional local tax subsidy for solar panels is a prime candidate for expiration.
The subsidy program for green roofs warrants reconsideration because it may be excessive.
Careful review of the cost-effectiveness of new textile recycling measures is appropriate.
Conversion of buildings to sub-meters should be accompanied by rent adjustments that require equitable rules.
A renewed effort to authorize and implement congestion pricing should be pursued.
Key Data
$38,000
— Cost of a commercial firm investing in a 5kW solar panel.
$7,600
— Total local property tax subsidy for a 5kW solar panel.
$4.50
— Green roof tax abatement per square foot for qualified buildings.
32%
— Average diversion rate in cities with pay-as-you-throw plans.
26%
— Average diversion rate in cities without pay-as-you-throw plans.
69%
— Share of New York City's GHG emissions accounted for by non-industrial buildings.
New York spends over $5 billion annually on economic development programs, including nearly $300 million in local tax breaks awarded by 115 Industrial Development Agencies. To improve outcomes, the state should implement stricter accountability, transparency, and performance metrics for businesses receiving incentives, ensuring they generate quality jobs rather than just receiving subsidies.
Recommendations related to Tax Incentives
Tax benefits and other incentives should go only to firms that actually generate quality new jobs in the state.
The well-documented failings of the now-expired Empire Zones program should be stamped out of any new economic development programs.
Benefits should not go to businesses that would be located here anyway, like 'big box' retail stores, if they offer only low-wage jobs.
Firms should be monitored to ensure communities get tangible benefits themselves in return for their tax dollar investment.
The best way to assure that the taxpayer is truly getting 'bang for the buck' is to require total transparency and accountability in the awarding of benefits.
There must be clear, publicly disclosed performance metrics and regular reporting on how businesses are doing in meeting their job and investment targets.
Benefits should be paid when job creation goals are actually met, not simply promised, and should be graduated to incentivize the creation of better, higher-paying jobs.
All economic development activities should be part of a coordinated state-wide strategy that makes targeted moderate investments to key industries.
New programs should start small so that we can learn what works and scuttle the rest.
A regional approach should include standardized applications and disclosures, and a statewide plan for targeting program dollars to areas and industries that have the greatest need.
Key Data
$5 billion
— The amount of public money spent annually on economic development programs and business tax breaks.
$300 million
— The amount of local tax breaks awarded each year by New York's 115 Industrial Development Agencies.
115
— The number of Industrial Development Agencies in New York that award local tax breaks.
New York's nine economic development programs, which provide discounted power to businesses, are ineffective, lack transparency, and fail to align with the state's broader energy and economic goals. These programs should be phased out in favor of a comprehensive strategy that sells power at market rates and links financial assistance to energy conservation requirements.
Recommendations related to Tax Incentives
Phase out current programs, as no new legislation should be passed to reauthorize them and current contracts should be allowed to expire, with a case-by-case review for those seeking a more gradual phase-out.
Include assistance for firms with high energy costs as part of a comprehensive economic development strategy administered by Empire State Development.
Sell power no longer used for economic development at market rates to generate between $479 million and $640 million in additional revenue.
Link energy conservation and economic development goals and programs by requiring firms that receive benefits to submit to energy audits and comply with best practices for energy efficiency.
Key Data
$479 million to $640 million
— Estimated annual cost of NYPA's economic development programs.
2,322 megawatts
— Total power reserved for selected firms under NYPA's economic development programs.
453,914
— Total jobs committed by firms participating in NYPA's economic development programs.
$55 million to $89 million
— Estimated annual revenue loss from selling purchased power at a loss.
$247 per job
— Lowest subsidy per job, associated with the Power for Jobs program.
$5,836 to $7,883
— Subsidy per job for hydro-based economic development programs.
The Empire Zones economic development program should be allowed to expire because it has proven to be an ineffective and costly investment for taxpayers. Instead, the state should adopt the proposed Excelsior program, which better aligns with criteria for successful economic development by targeting specific industries and basing benefits on actual private sector investment.
Recommendations related to Tax Incentives
The State Legislature should allow the seriously flawed Empire Zones program to sunset as of June 30, 2010, as established by law.
The State Legislature should enact the Excelsior program as proposed by the Governor.
The State Legislature should reject provisions that would extend local Empire Zone administration boards and wage credits.
The State Legislature should not continue policies that have proven ineffective.
New York's Empire Zone program, originally designed to stimulate economic growth in distressed areas, has become an ineffective and costly vehicle for corporate tax breaks that fail to meet job creation targets. The program's lack of accountability and susceptibility to loopholes necessitate its complete elimination to protect scarce public resources.
Recommendations related to Tax Incentives
The state should abolish the Empire Zone program because it is not worth the tremendous loss of revenue it requires.
Increasingly scarce public resources should no longer be spent on the Empire Zone program in this unproductive way.
The Empire Zone program should be a prime target for elimination given the state budget is under enormous stress.
The state should end the Empire Zone program as it has proven reform-resistant and ineffective.
Policymakers should cease expanding and perpetuating the Empire Zone program, as it is unfair to taxpayers and residents of communities not receiving strategic economic development assistance.
Key Data
$582 million
— The cost of the Empire Zone program in 2008, which grew from $30 million in 2000.
$900 million
— The amount of unused tax credits held by firms that can be used in future years.
$514 million
— The total amount of Empire Zone tax credits claimed by firms in 2006.
$391 million
— The amount of tax credits claimed by just 500 firms, representing 76 percent of the total program cost in 2006.
2,886
— The number of companies, representing 58 percent of program participants, that missed their job or investment targets by at least 60 percent.
$127 million
— The amount of tax credits, or about 25 percent of total annual claims, that went to Fortune 1000 firms.
New York's economic development programs, which provide power subsidies to businesses, lack transparency and fail to align with broader energy conservation goals. These programs should be phased out or overhauled to ensure that resources are focused on high-value industries and that remaining power is sold at market rates.
Recommendations related to Tax Incentives
State leaders should phase out current economic development programs by allowing current contracts to expire and passing no new legislation to reauthorize them.
New York should include assistance for firms with high energy costs as part of a comprehensive economic development strategy administered by Empire State Development.
The state should sell power no longer used for economic development at market rates to ensure funds remain devoted to economic development goals or energy infrastructure improvements.
Firms that receive benefits should be required to submit to energy audits and comply with best practices for energy efficiency to link energy conservation and economic development goals.
Key Data
$479 million to $640 million
— Estimated annual spending by the New York Power Authority on nine economic development programs.
$362 million to $489 million
— Estimated total cost of the five hydro economic development programs.
$117 million to $151 million
— Estimated total cost of the five purchased power economic development programs.
$5,836 to $7,883
— Range of per-job subsidies offered by the five hydro economic development programs.
$247 to $630
— Range of per-job subsidies offered by the five purchased power economic development programs.
$164,000
— High-end per-job subsidy amount received by some beneficiaries of the economic development programs.
New York's Empire Zone Program, which costs nearly $600 million annually, has been criticized for failing to meet job creation and investment targets while lacking objective criteria for public investment. The program should be phased out in favor of a more targeted economic development strategy that prioritizes measurable outcomes and strategic growth industries.
Recommendations related to Tax Incentives
We are writing to support Governor David Paterson's proposal to scale back the almost $600 million a year Empire Zone Program and to recommend phasing out this largely wasteful use of limited state resources.
It is time to replace Empire Zones with a more targeted approach to statewide and regional economic development that stimulates creation of good jobs and encourages investment in growth sectors of our economy.
Decertification of businesses in substantial noncompliance and cessation of any new commitments that fail to meet well defined, strategic objectives is certainly appropriate and necessary.
New York should come up with a more effective approach to economic development that focuses in on strategic growth industries and offers deeper benefits for the most distressed areas of the state.
We call upon the Legislature to work with the Governor, Empire State Development, and regional and local economic development groups to develop a new program which result in significant (and measurable) outcomes.
Key Data
$600 million
— The annual cost of the Empire Zone Program, which is proposed to be scaled back.
58%
— The percentage of participating firms in 2006 that fell short of their job creation and investment targets by 60% or more.
69 to 79%
— The failure rate of participating firms in several regions regarding their job creation and investment targets.
400%
— The wide variance in the value of awards given to businesses under the Empire Zone Program.
New York faces a significant fiscal challenge with multi-billion dollar budget gaps, necessitating a shift away from tax increases that discourage economic investment and toward more efficient spending reforms. By eliminating ineffective programs like the Middle-Class STAR rebate and reforming the Empire Zone program, the state can better align expenditures with current economic realities while maintaining competitiveness.
Recommendations related to Tax Incentives
The state budget should limit new revenue measures to no more than $2 billion to avoid excessive reliance on increased taxes that discourage investment.
The state should eliminate the ill-conceived and poorly targeted Middle-Class STAR rebate to improve program cost-effectiveness.
The state should reform the Empire Zone program to address the high rate of businesses failing to meet job creation and investment targets.
Key Data
$5 billion
— The amount of new revenue measures proposed in the Governor's Executive Budget.
$2 billion
— The maximum amount of new revenue measures the budget should include to avoid discouraging investment.
$1.9 billion
— The amount of revenue increases mis-categorized as spending reductions in the Governor's budget.
$16.5 million
— The savings achieved from agency consolidations and developing shared services.
$404.0 million
— The projected revenue from a non-dietetic soft drink tax.
$240.0 million
— The projected revenue from a covered lives assessment on insurance companies.
New York's Empire Zone program, originally designed to spur job growth in distressed areas, has become an ineffective and costly vehicle for corporate tax breaks that fail to meet stated economic goals. Given the program's history of reform-resistance and its tendency to benefit large corporations rather than distressed communities, it should be abolished to preserve scarce public resources.
Recommendations related to Tax Incentives
The time has come to end the Empire Zone program.
Increasingly scarce public resources should no longer be spent in this unproductive way.
The Empire Zone program should be a prime target for elimination.
Key Data
$582 million
— The cost of the Empire Zone program in 2008, representing a twenty-fold increase from 2000.
$514 million
— The total amount of tax credits claimed by firms in the Empire Zone program in 2006.
$391 million
— The amount of tax credits claimed by just 500 firms in 2006, representing 76 percent of the total program cost.
$127 million
— The amount of tax credits claimed by Fortune 1000 firms in 2006, accounting for 25 percent of total annual claims.
$900 million
— The value of unused tax credits held by firms that can be used in future years.
9,800
— The number of certified businesses participating in the Empire Zone program statewide.
A simulation of business taxes across various locations shows that combined federal, state, and local taxes significantly reduce the rate of return on new business investment, with New York City consistently ranking as the highest-tax jurisdiction. The analysis indicates that corporate tax changes in the 2007-08 state budget, including rate reductions and apportionment adjustments, would lower effective tax rates for representative firms, though New York City would likely retain its top ranking for highest taxes.
Key Data
42.1%
— Average combined federal-state-local effective tax rate in New York City for representative firms before the 2007-08 state budget changes.
40.9%
— Average combined federal-state-local effective tax rate in New York City for representative firms after the 2007-08 state budget changes.
7.5%
— Top state corporate tax rate prior to the 2007-08 state budget changes.
7.1%
— Reduced top state corporate tax rate following the 2007-08 state budget changes.
6.5%
— New corporate tax rate for manufacturers effective in 2008.
36-50%
— Range of effective tax rates on business expansion in 2006 across different locations and industries.
High local taxes can discourage economic growth, though the magnitude of this effect is debated and depends heavily on the quality of public services provided. Rather than relying on ad hoc discretionary tax incentives, policymakers should pursue broad-based tax reform to create a more equitable and efficient business environment.
Recommendations related to Tax Incentives
The city should support broad-based tax reform rather than the use of ad hoc discretionary tax incentives.
New York City must be ever more diligent in promoting agglomeration benefits through non-tax policies and providing public services efficiently.
There is plenty of room for property tax reform, in particular, reducing differentials across property classes.
Key Data
$8
— Amount of every $100 of taxable resources absorbed by New York City's local taxes in 1997, which was about 80 percent more than the average for the next nine largest cities.
18.5%
— The increase in property tax rates instituted in 2002 that the 2006 model predicts phasing out would increase private sector employment by 26,400 jobs.
$1.6 Billion
— The net revenue loss associated with the phase-out of the 2002 property tax increase.
$62,000
— The estimated annual cost per private sector job in terms of revenue loss.
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