With unemployment in Rhode Island heading in the opposite direction of the country as a whole, you might think Democrat Governor Gina Raimondo would avoid new taxes specifically targeted at businesses. If so, you would be wrong:
Raimondo wants to restore a limit on the amount of business losses that can be deducted from state income taxes, after the federal CARES Act coronavirus relief bill eliminated it for the last three years. The increase in deductions allowed by the CARES Act is estimated to cost the state $29 million over two years.
In this case, the tax itself isn’t even the worst part. This particular method for raising taxes could send business owners back to their accountants to revise tax forms already submitted, some of them for a second time.
Generally, economists argue that taxes should be designed to affect the economy as little as possible. Moves like Raimondo’s ignore this principle… and then amp it up to a higher level. This sort of policy not only takes money out of the productive economy, but it also sends a signal of vulnerability and unpredictability to all businesses. As an initial pass, they have to figure a higher tax burden into their plans. They then must put an asterisk on their planning because they can never know if the tax they’re paying this year is actually the tax they’ll be forced to pay, even when they thought they’d closed the books on the year.
Raimondo’s record on employment in Rhode Island has been characterized by top-down control and an ongoing PR effort to spin which numbers are promoted. Our state’s record following the COVID-19 recession shows her approach simply doesn’t work. And now she wants to make things worse?