Magellan and the Cost of Business in RI

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Good news, Rhode Islanders!  We paid another company to locate in Rhode Island jobs that it already planned to create:

The Commerce Corporation board approved up to $2.1 million in tax credits that Magellan can receive over 10 years if it creates 75 new jobs. An additional 25 full-time jobs are also expected to be added by the company. Commerce Secretary Stefan Pryor said an outside analysis showed the deal will be revenue-positive for the state.

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In case you don’t have a calculator handy, that’s $28,000 per job.  This is madness.  Bureaucrats and political operatives are playing the big shots with our money with no real skin of their own in the game.

If we have to subsidize companies to the tune of $28,000 per job to locate in our state, we’re clearly making it $28,000 too expensive to create jobs in Rhode Island.

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  • Rhett Hardwick

    Justin, I think you assume that there is some thinking going on here. Government is not where you go for original thinking. I think it is simply a matter of imitating your neighbors, much as banks do. Everyone else is paying companies to come to their state; if we don’t do it, no one will think we are “players”.

  • D. S. Crockett

    Justin, no comment on what the 100 new jobs will pay? I’ve come full-circle on this issue. Look at from this perspective. The State, thankfully, does not get its hands on $2.1 million future tax receipts. Instead 100 jobs are created, hopefully good paying ones. These jobs will not only create tax revenue, regrettably, but also provide 100 souls with jobs which money is used to support their families and communities through the multiplier effect.

    • Justin Katz

      I think I read that they’ll all be in the $100,000 per year range, which is great for the recipients, but we can’t have a society built on the principle that everybody should subsidize every job that offers politicians some benefit.

      As for the souls, these jobs were going to be created regardless of the subsidy. Perhaps it wouldn’t have been in Rhode Island, but somebody, somewhere would have had the jobs. And in that regard, there is no certainty that they’ll go to people who currently live in Rhode Island or who will live in Rhode Island when they get the jobs.

      And the problem with citing the multiplier effect is the assumption that this money appears out of nowhere. I simply don’t believe that government is well situated to say that this is the most economically efficient use of this money.

      • D. S. Crockett

        We are taking about future taxation therefore forcing government to curtail its future spending. RI suffers economically in part because its small size, squeezed between two larger neighbors, people are free to live elsewhere and freely commute to work in RI. Finding a way to impose in state residence in exchange for tax abatement is the way to go, if feasible. a big if.

        • Rhett Hardwick

          The question to my mind is whether the tax credit was the efficient cause of the decision to move here. I am sure that both the payor, and the payee, will say it was. Since it is now part of the “big game” to get states to “bid” tax credits. I wonder. What is the possibility that businesses simply get the state to bid, which sweetens a deal already decided on. I forget what Boston paid GE, but I think it raised the bar. The advantage to the politicos is that they can claim to have “created jobs”. In the grand scheme of things, I doubt that 2.1 million was the decisive factor. Lower land costs and less costly construction might easily equal that.

          • D. S. Crockett

            Rhett: Sounds like to lament the loss of $2.1 million future tax revenue? Give them $2.1 they will spend $3.1 million. Saving $2.1 million in anyone’s book is a great deal. I pays for the land and or cost of construction. To me, the process of rewarding tax abatement works more so if in state residence can be imposed for the abatement.

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