Tax Breaks for the Trendy, Not the Ordinary

A curious front-page story by Michael McKinney claimed the most prominent spot in yesterday’s Providence Journal. The topic is a series of bills currently making their way through the General Assembly that would promote businesses in the arts industry, mainly through tax breaks, specifically sales taxes. What’s peculiar is that two economists extol the breaks, and McKinney cites no opposition.

Bryant University Economics Professor Edinaldo Tebaldi says the arts “go hand in hand with this attempt to boost leisure in general.” Both he and University of Rhode Island Business Professor Edward Mazze note that start-up costs for arts companies are relatively low, and both cite the multiplier effect of tax breaks. (Tebaldi does, however, suggest that infrastructure spending would be more effective “in the long run.”) Mazze told McKinney that (in the latter’s words) “the state has to figure out what it is good at,” and arts are on the list.

In the running debate about Rhode Island’s condition, however, one increasingly hears references to the “quality of life” (location, activities, history, and so on) counterbalanced with acknowledgements that fewer and fewer Rhode Islanders are actually able to avail themselves of them. In other words, it’s well and good to emphasize the leisure economy, but an inevitable brick wall awaits if the rest of the economy doesn’t create the space for, well, leisure.

The Current followed up with Mazze, asking whether there’s some reason to think that the arts are especially desirable, as an industry, or present an unusual return on public investment. He replied that the state “already has the ‘assets’ in place for a strong arts community,” meaning factors related to culture, education, and location, as well as service firms in “arts-related” fields. Artists, he notes, are also not as prone to automation, increasing the number of employees. (A contrary argument could be made that the artists, themselves, are typically individuals, and that most of the auxiliary activities, such as printing, recording, and promulgation, are all very automated.)

Still, if tax breaks are worthwhile for the arts community, are there any other lines of business that might profit the state as much with similar treatment? Mazze says there are several industries of strength, in Rhode Island, that are well suited to generate jobs, including “marine industries, distribution companies (air, land, water), leisure and hospitality, education and health.” That’s where he advises the state to focus its investments.

Such statements return the discussion to the professor’s comment to McKinney: Whom do we mean as the decision makers when we say that “the state has to figure out what it is good at”?

In the context of tax breaks and public policy, the answer would have to be political leaders and other representatives of the state’s ruling class. That approach, however, assumes that the insular community at the top of the local pyramid has an unusual talent for guiding the multibillion-dollar enterprise that is the State of Rhode Island and, moreover, has unique incentive for making the pieces work. Neither proposition is reflected in reality.

The references to start-up costs similarly give the impression of a top-down view of society that isn’t necessarily in keeping with individual experience. A carpenter, plumber, copyeditor, or data analyst who has been working at his or her trade for some time may very well be taking the step into self-employment with all of the necessary start-up costs completed. The carpenter has his tools, and the editor has her education. Neither is likely to need as much up-front capital for materials as, say, a painter. In the construction trades, materials are purchased by the client, and lumber yards are quick to extend credit for that purpose.

Whatever the case, Rhode Island would do well to extend its romantic sensibilities concerning free-spirited artists to the rest of its residents. Nobody is going to pick a better career for individual Rhode Islanders or have more incentive for their success than a citizenry with control over their own destinies. It shouldn’t be necessary to sell one’s passion to the General Assembly in order to find encouragement from the state.



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