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Albany’s Tax-Break Protection Racket

In Albany, what is legal is often most scandalous. As long as money drives policy in Albany, corruption will remain endemic.

Published: September 23, 2013

Published in the New York Daily News.

Call it the case of the almost-but-not-quite disappearing tax break.

It will surprise no one that lawmakers can have many reasons to vote for particular tax breaks: growing the economy, helping constituents and, sometimes, helping a big campaign contributor.

Yet, the New York State Legislature has raised the dispensing of tax breaks to a high art.

Why award a tax break only once? Far better to set a time limit for the tax breaks — and then ask for more campaign contributions before it is set to expire.

There may be perfectly legitimate reasons for granting a given tax break for a certain period. But the legislature’s record in repeatedly renewing these breaks raises cause for concern, and offers further evidence that New York’s campaign finance system is in need of a major overhaul.

As part of its testimony last week before the Moreland Commission to Investigate Public Corruption, the Brennan Center for Justice uncovered 14 different tax breaks that have been repeatedly sunsetted and renewed, covering everything from financial services to film production to wagers on horseracing.

One example: In 1999, the legislature passed a series of new regulations on horse racing and some other gambling interests that included a reduction of taxes on wagers from 7.5 to 1.6%. The package was scheduled to expire in 2007, but has been reauthorized seven times since then, most recently in 2013.

The horseracing industry makes enormous political donations in New York. According to Common Cause of New York, racino interests contributed $2.5 million to political campaigns in the state between 2005 and 2012, and another $2.4 million to the Committee to Save New York. Horseracing interests other than the racinos contributed another $2.2 million over that period.

The New York Gaming Association, whose members are New York racinos, and its PAC have given prodigiously — over a quarter of a million dollars to state candidates and committees in the last three years alone. In just the three months before the 2013 extension of the lower tax rate, a period covering January to March of a non-election year, they made contributions to 61 different candidates and committees.

Another example: Everybody recognizes film and television production is important to the city and state’s economy. So it might make sense to award these industries permanent tax credits, even though they will cost the state $374 million this year.

Yet, the legislature has prevented these credits from expiring three times since 2006. Just a handful of the film and television production companies that have benefited the most from the film credit have together given more than $400,000 to both major political parties since it was enacted.

There is nothing inherently wrong with preferential tax treatment for certain industries or transactions. Millions benefit from the home mortgage deduction, for example.

But there would be great uncertainty if that deduction came up for renewal every five years. The same is true with these tax breaks. Business would benefit from knowing the rules in advance. That might make it more difficult for incumbents to raise money, but that shouldn’t be what makes policy in New York.

It’s difficult for legislators who depend on their ability to raise huge sums from special interests to win reelection to act in the public interest.

The only way to give individual donors anything close to the power of the real estate or entertainment industries is a system of small-donor multiple matching funds, like the one used so successfully in New York City for the past 24 years.

The governor named his commission wisely. A body to investigate “public corruption” need not investigate illegal practices alone.

In Albany, what is legal is often most scandalous. As long as money drives policy in Albany, corruption will remain endemic.

Photo by kenteegardin.