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Instead of making our state more attractive to corporate America, we have gone the other direction with a tax structure that scares many away. It’s systemic, because everywhere we turn we are being taxed, and nickel & dimed to the poor house, in order to make up for extravagant government spending that our workforce and revenue can’t sustain.
Like me, aren't you outraged by the ceaseless squeeze. The income taxes, property taxes, inventory taxes, gas taxes…a tax for this and a tax that… fees, surcharges, and more creative ways to fleece us. Is it not enough that we have one of the highest overall tax burdens in the country? The hits keep coming with no plan to get us out of the mess.
We have the second highest unemployment rate in the US, second to Michigan, and if it were not for the Detroit automaker’s troubles then RI could very well have the highest unemployment in America. It is no wonder why people want to leave in droves… if they could only sell their houses. Our noted URI economist Len Lardaro has said, “Would the last person out of RI please turn off the lights?” The sad thing is with the recent 21% increase in electricity many are already in the dark.
CNBC: America’s Top States for Business 2008.
The scale is 1-50 with 1 being the best and 50 is worst.
Category |
Score |
2008 Rank |
2007 Rank |
127 |
46 |
46 |
|
188 |
18 |
28 |
|
24 |
49 |
43 |
|
139 |
17 |
22 |
|
113 |
29 |
31 |
|
60 |
30 |
30 |
|
13 |
48 |
48 |
|
8 |
43 |
45 |
|
8 |
47 |
46 |
|
12 |
39 |
25 |
|
692 |
Only four States rank worse than RI for the cost of doing business, and only one State has a worse economy.
Too many of our youngest and brightest are forced to go to Boston or move away to pursue careers because of the lack of opportunity here. Have you ever heard of the “Mass. Exodus?” Accordingly, recent data shows RI’s average salaries are staggeringly deficient to other states. In fact, we are the only New England state in recession and further one of nine states in a recession. Here is an excerpt from The Providence Journal Online from Sunday August 3, 2008 about The Tax Policy Workgroup entitled “Group’s mission: Help Fix R.I. Taxes” by John Kostrzewa. He writes,
“Rhode Island is in a recession. Other states in New England, and across the United States, are also suffering through a severe slowdown that may get worse before it gets better. Eventually, however, the tough times will end.
The states that offer solid, well-structured budgets and competitive tax policies will emerge from the recession ready to expand. When credit loosens, companies will begin considering where to relocate or add jobs.
Rhode Island has a national reputation as a high-tax state. But some progress has been made.
The General Assembly’s decision this year to hold the line on broad-based taxes moves the state in the right direction. It sends a signal to businesses that Rhode Island is serious about reducing its tax burden.
Still, Rhode Island lags behind other states.
A report prepared by the state Department of Revenue in June found that the state ranked 11th nationwide in total state and local tax burden for fiscal year 2006, with taxpayers paying $119.79 per $1,000 of state personal income. That’s slightly better than in 2005, when Rhode Island ranked ninth, but still puts it well behind other states.
By comparison, Massachusetts had the 37th highest total tax burden, while Connecticut ranked 20th “
Oh... it gets worse, because we are now in the top five in overall tax burdens for 2008! Stand by for the supplemental budgets after the election, they may just contain new taxes!
RI has only 40% of its workforce earning a professional wage while 60% earn less. In Massachusetts, the reverse is true with nearly 60% of the workforce earning a professional wage and 40% less earn less. Like so many other states, this means that Massachusetts’ revenue from payroll related taxes is proportionally greater. They are better suited to support their state budget and do not have one of the highest overall tax burdens in the country. In Rhode Island however, we have proportionally fewer people and proportionally smaller salaries. The net result is less tax revenue money to fund an unaffordable budget.
The fundamental difference is systemic reactive management and not proactive leadership. Here is what I mean. The fact is, RI’s dwindling manufacturing base, including our once proud costume jewelry and shipbuilding, has painfully gone overseas beginning in the late 1980s. Even more painful has been the slow rise of an ad hoc service sector that hasn’t produced. Our leaders did nothing to redefine and develop a business niche. The result was we were one of the last states to recover from the previous economic downturn and one of the first to slide into recession now. We will continue to suffer these symptoms because we still have no niche, no plan, and few high paying jobs. Remember all the banking consolidations, the layoffs, the mass exodus of manufacturing to Asia, the software implementations and the production innovations? Jobs went away displacing workers and were never replaced because we didn’t react. What was once a thriving manufacturing economy is now a “catch as catch can” economy.
URI economist Len Lardaro was published in The Providence Journal on June 8, 2008. He writes,
“What is our state’s dominant niche? Recently, we decided to move towards biotechnology, pharmaceuticals, life sciences, and oceanography. Is our current tax and cost structure consistent success in this niche? I seriously doubt it. How far, then, will our existing economic climate be able to carry us? Will we be able to generate the levels of employment, income, and tax revenue that will allow us to attain our desired economic goals?
It is on this count that the glaring deficiency of our non-competitive tax and cost structure exacts its toll. All too often, EDC (Economic Development Corporation) is often forced to make deals with individual companies or industries to generate these types of economic gains. How large have these gains been? Generally, not large enough, as employment here has continued to fall since January of 2007. In terms of fairness, these deals add insult to injury for existing firms here who ask why they can’t receive better treatment all the time. Efforts to expand existing businesses and to get new firms to locate here absent specific incentives have not been sufficient for us to be as successful as we should have been in this post-manufacturing era. Unfortunately, the old saying about Rhode Island remains as valid as ever: “If you can make a profit in Rhode Island, you can make a profit anywhere.”
We need business development and jobs, not taxes and give-a-ways.
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