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A Well-Planned “Shock” To The System Is, Indeed, Warranted

According to the Rhode Island Family Prosperity Index, “startups aren’t the only thing when it comes to job growth. They’re the only thing.” The only way to incentivize enough start-up activity to make a difference in our state is to create a business climate that is attractive enough to make thousands of entrepreneurs want to invest here. Crony deals for a few dozen companies will not get it done.

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Educational Efficiency Requires Lower Spending

Here’s an interesting study.  It’s from GEMS Educational Solutions, and I found it via a positive mention in a Guardian article, so we’re probably not talking a right-wing group, here.

The study compares certain educational statistics across countries, and one of its principles is that “inefficiency can be a result of either underpaying or overpaying teachers.”  By that measure, the United States would become more efficient (better managing results versus tax rates) by lowering salaries by five percent and increasing class sizes by 10%.

Rhode Island’s teacher salaries are top 10 for the country, so 5% would be too low for our state.  Also, the 15.3 student:teacher ratio listed on GEMS’s application compares with a Rhode Island average of 8.

To be clear, these are back-of-the-envelope comparisons.  A more-thorough review might require adjustments of the numbers (different years, different teacher roles included in the student ratios, etc.).  I come across people, though, especially locally, who find inconceivable the idea that less spending on anything government does might be bad.

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Mike Stenhouse on GoLocal LIVE – Gov’s Manufacturing Council

Thanks to Kate Nagle and GoLocalProv for inviting the Rhode Island Center for Freedom and Prosperity’s Mike Stenhouse on their new GoLocal LIVE program yesterday. They discussed, in part, Governor Raimondo’s recently announced manufacturing advisory council, which is comprised of lots of people but not a whole lot of economic diversity.

Meanwhile, congratulations and best wishes to Kate Nagle, Molly O’Brien and GoLocalProv on the launch of their cutting edge new program!

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Some Day, My Prince … Er, Cheap, Green Energy Will Come

You may have been keeping half an eye on the proposed power plant that a firm called Invenergy would like to build in Burrillville. Friday, the Providence Journal reported that

Invenergy has failed to sell the second half of the power output of its proposed fossil fuel-burning power plant in Burrillville to the regional electric grid.

Opponents of the proposed plant understandably view this development as good news. However, it is not a fatal blow for the proposed power plant, as the article notes.

Further along, the article also notes that New England has had 4,200 megawatts of generating capacity taken off line (my observation: this happened in large part due to out-of-control EPA regulations by the Obama administration), and another 6,000 megawatts are at risk of going off line. Accordingly, many of us are concerned about the cost and continued adequate supply of electricity.

Environmentalists believe they have the answer.

But opponents of the plant say that renewable sources can fill in any need for new power in New England.

Yikes. Sorry, no, that is simply not the case.

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So, Free Tuition to a College with “Deficiencies” Training Teachers Whose Students Aren’t Proficient?

This news, reported in an early-January article by G. Wayne Miller in the Providence Journal kind of disappeared with the governor’s announcement of free tuition, but it’s relevant at the front and back ends:

A Rhode Island Department of Education review of Rhode Island College has found multiple deficiencies in educator programs at the school, which graduates a majority of the state’s elementary and secondary school teachers and administrators.

Problems at two master’s-level programs were judged so severe that RIDE declined to renew them. Seven other programs were conditionally approved. A tenth was approved “with distinction.”

As the article states, this college is graduating “a majority” of the “teachers and administrators,” and the schools at which those graduates are going on to teach are often leaving students to graduate without being proficient in math and reading.  So Democrat Governor Gina Raimondo is proposing to give free-to-the-student (paid by taxpayers) tuition to students who often aren’t adequately prepared for college, some of whom will enroll in programs for which the state has reason for concern and then go on to teach at the schools that aren’t offering adequate college preparation.

That sounds very Rhode Island, but it doesn’t sound like a winning formula for the people who live here.

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Discount Rate Assumptions and the Certainty of Tax Increases

After years attempting to interpret public documents related to pension funds to understand the method of deciding what a reasonable investment return assumption would be, I finally have it straight from a municipal investment advisor. As I’ve posted on Tiverton Fact Check:

Me: So if a town comes to you and says, “We want to hit this number,” you say, “Well, what’s your risk?,” and that’ll play into seven-and-a-half percent.  The fact that the town can then in 20, 30 years increase taxes to make up for the loss, then you have a little higher tolerance for risk, so you can go up to 7.5%, which you may never hit, but in the end of 20, 30 years, you’ve got other assets — taxpayers — you can take money from.  Is that part of the conversation?

Gene McCabe, Director of Investments for Washington Trust:It is.

In the not-too-distant future, I suspect it’ll become unreasonably expensive for us municipal assets.  Elected officials and government employees should start pondering what will happen when assumptions about how much money can be confiscated from Rhode Islanders prove as fanciful as assumptions about high returns at the stock market roulette wheel.

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Can Lawmakers Become Rhode Island’s Heroes?

Everyone concerned about the well-being of our state’s families should be alarmed by our unacceptable 48th-place ranking on the Family Prosperity Index (FPI). The FPI demonstrates quantitatively the undeniable link between economic and social policy in determining family prosperity. Whether it is criminal justice reform, taxation, or education, if we are to improve our state’s dismal 48th place ranking in overall family prosperity, we must make helping families the focus of our public policy and private advocacy. Lawmakers can become heroes if they can construct policies that actually address the real needs of real families.

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Doesn’t Money Have to Come from Somewhere?

A nagging question is never addressed in this Christine Dunn’s Providence Journal article:

One of the Trump administration’s first actions last Friday was the suspension of a previously announced 0.25 percentage point rate cut in the Federal Housing Administration’s annual mortgage insurance premium. The planned cut, scheduled to become effective Jan. 27, had been projected to save new FHA-insured homeowners an average of $500 this year….

The FHA is a part of the U.S. Department of Housing and Urban Development, and it offers mortgage insurance, most often to first-time buyers and low-income individuals. An estimated 16 percent of mortgages in the U.S. are FHA-insured. The mortgage insurance is designed to protect lenders against defaults.

Was there no information about why the Trump administration took this action or where the money comes from?  Maybe this move benefits corporate interests, or maybe it benefits taxpayers; it would seem incumbent upon journalists reporting the benefits of a government program for the recipients to also give some sense of whom it affects adversely.

Inadvertently or deliberately, this omission perpetuates an imbalanced understanding in the public, disallowing us from weighing costs when assessing how well government is making decisions.

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When the “Home-School Community” Is Separate from “the Community”

In Tiverton, the School Committee sees public education as promoting government-branded schools, not ensuring educational services that suit the needs of all of our children, as I’ve written on Tiverton Fact Check:

This distinction became clear at the January 24 meeting of the Tiverton School Committee, which introduced a new policy explicitly denying home-schooled students the opportunity to take classes — particularly technical and vocational classes — outside of the district through arrangements that Tiverton has made. Students enrolled in Tiverton schools can take such classes, even attending alternative schools full time at no cost to their families. …

The education officials in Tiverton have already decided that it is the responsibility of taxpayers to cover the tuition of students who want courses of education that they can’t get within the district. They are just applying that policy in a discriminatory way. No matter how much you may pay in taxes or contribute to the town in some other way, unless you put your children under their complete control, you are part of “the home-school community,” which is apparently separate from simply “the community.”

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A More Holistic Path To Help Real Rhode Islanders

It is time to challenge the status quo insider mindset and to search for a more holistic path to help real Rhode Islanders improve their quality of life. This week, the Center held a forum at Bryant University that provided an ideal opportunity for community, religious, and political leaders to convene to begin the process. We brought together leaders on both the left and right to discuss the challenging questions, and the strongest voices stood in stark contrast to the corporate tax-credit policies that have been the center-piece of the Raimondo administration’s economic development agenda.

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Raimondo Insults Your Intelligence with College Plan

This morning, I noted that legislators are the only people in Rhode Island who can promise workers a 10% increase in pay without worrying about where the money will come from.  It just magically appears in their imaginations.  At noon, I suggested that Rhode Islanders should be embarrassed that their state is so dependent on federal government welfare.

The state government’s latest revenue and caseload conference estimated that the government’s revenue will fall $52 million from fiscal 2016 to fiscal 2018.  And during the budget process, last year, the state expected that deficits would climb $40-60 million per year, hitting $333 million by 2021.

So how in the world does Democrat Governor Gina Raimondo state the following — and get away with it in G. Wayne Miller’s Providence Journal article — while promising the new $30 million expense of giving all Rhode Islanders two free years of college at a state institution?

We have the money. This is affordable. It’s a smart solution.

It’s a vote-buying giveaway pure and simple that counts on Rhode Islanders’ not noticing that they’re paying the bill.  It’s an insult to our intelligence.

Moreover, we should expect that the estimated cost is laughably low.  Given free tuition, more families will use the colleges and university, and the institutions will surely increase their tuition rates once the cost to the decision makers (students and their families) is zilch (or half-price, for four-year degrees).  And this doesn’t even get into the governor’s assumptions that people who have no financial skin in the game for their degrees will actually take their studies seriously and apply themselves and that those who do will stay in the state rather than taking their subsidized degrees to states that actually have healthy economies.

One can only hope that Rhode Islanders aren’t so far gone, at this point, that they fall for the governor’s snake oil sale.

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The Conversation Starts Tuesday: Opportunity To Become Self-Sufficient

Everyone concerned about the well-being of our state’s families should be alarmed by our unacceptable 48th-place ranking. It is time to challenge the status quo insider mindset and to search for a more holistic path to help real Rhode Islanders improve their quality of life. This week, the Center will co-host a forum at Bryant University, that will provide an ideal opportunity for community, religious, and political leaders to convene and begin the process.

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Corporate Welfare – Are We Being Played?

For years, the insiders have conspired to create the cronyism rampant in the Ocean State. In their zeal for headlines, does the political class ever question the value of these corporate welfare deals? Just this week, we saw the results in questions surrounding the Governor’s claims in the Wexford deal. The tone-deaf Brookings report lays the ground work by recommending that we can achieve better results if, instead of taking the arbitrary approach to 38 Studios-style corporate cronyism that has dominated Rhode Island public policy for decades, we take the same approach in a more targeted and strategic manner. Nonsense.

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No More Blind Eye – General Assembly Must End Corporate Welfare Scam

In light of GoLocalProv’s blockbuster expose Friday that the Wexford job creation claim is off by nine hundred, the General Assembly needs to immediately defund all corporate welfare – and request that the Governor claw back much if not all of the taxpayer subsidies currently earmarked for Wexford.

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Rhode Island “Company of the Year” (and State Ward) Already Has a Broken Turbine

Much to the detriment of the state’s rate payers, Deepwater Wind began generating electricity on December 12. Less than three weeks later, one of its five turbines broke (oopsie). As though wind energy isn’t already expensive enough, now we have to add the cost of making repairs thirteen miles out on the ocean. (‘Cause the cost of water and seawater-related repairs is always very reasonable, right, boat owners …?)

It probably was not a coincidence that the company made this embarrassing admission on a day – the Friday before Christmas – sure to glean the absolute minimum amount of public attention.

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Social Dynamism in Government Policy

A Wall Street Journal editorial has gotten some attention with the headline, “School Choice Saves Money“:

Using data from a crime and graduation study by Corey DeAngelis and Patrick Wolf at the University of Arkansas, the Milwaukee study finds that through 2035 Wisconsin will receive a $473 million benefit from higher graduation rates by choice students. More education translates into higher incomes, more tax revenue and a lower likelihood of reliance on government welfare or other payments. Meanwhile, greater economic opportunity also prevents young adults from turning to crime, which the study estimates will save Wisconsin $1.7 million from fewer misdemeanors and $24 million from fewer felonies over the same 20 years.

Some years back the RI Center for Freedom & Prosperity had a victory, in our view, pushing dynamic scoring into the legislative debate with our proposal to eliminate the state sales tax.  Dynamic scoring means that one considers the economic effects of a policy and subtracts the increased tax revenue from the policy’s “static” (“sticker,” or first-order) cost.  The above paragraph reminds us that there is a social dynamism, too, reducing the need for government services as well as increasing the tax take from a healthier economy.

Obviously, this has perverse relevance to Rhode Island’s “government plantation,” which might gain back some lost tax revenue but lose clients and political leverage over them.

But imagine if we had policies that kept kids engaged in good schools (through school choice) and gave them opportunities for more entry-level jobs (through a lower minimum wage and reduced licensing requirements). It might just reduce the cost of paying government to mitigate social problems, create an environment of entrepreneurship, and turn our state around.

Of course, it would require us to shift away from the government plantation, so it won’t happen.

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A Proposal for RI, Surrounded by Minimum Wage Increases

Eric Morath reports in the Wall Street Journal on minimum wage increases that have gone into effect for this new year:

Economists and policy makers are of two views on the costs and benefits of minimum-wage increases. While the policy puts more money in the pockets of low-wage workers, it also gives employers less incentive to add to their payrolls, leaving some workers behind.

A 2014 study from the nonpartisan Congressional Budget Office found raising the federal minimum wage to $10.10 an hour would reduce job creation by 500,000 over two years. At the same time, the report estimated that the increase in the federal minimum wage would raise the pay of 16.5 million workers who kept their jobs.

The accompanying chart shows that Connecticut went up by fifty cents, while Massachusetts went up a whopping dollar, tying Washington state for highest in the country (not counting D.C.).  Rhode Island employers with minimum wage workers now have a fifty-cent advantage over their Connecticut competitors and a $1.40 advantage over Massachusetts.  That goes right to their bottom line.

Here’s what the Ocean State should do:  Keep our minimum wage the same but implement a dramatic reduction of the sales tax, at least down to 3%.  That will boost sales in RI and increase employer demand for minimum wage workers, some of whom will be those frozen out of Massachusetts and Connecticut by the too-high minimum wages there.  However, the increased demand for labor and the improving prospects for retailers and all industries that serve them should drive up wages naturally.

Rhode Island faces a golden opportunity to increase the prosperity of its population, and all we need is for our politicians to resist the easy “me, too” of voter giveaways at businesses’ expense and make budget adjustments that put Rhode Island families first.  Those who object that states should not enter into this sort of attempt to undercut each other must then explain why we have to resign to giving money-grubbing businesses taxpayer handouts in order to compete with other states in that way.

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Why Go After the Car Tax?

I’ve been meaning to suggest that this doesn’t look like such a great idea:

[Democrat Speaker of the House from Cranston Nicholas] Mattiello says the state’s recent increase in revenue will help.“Our revenues are on the rise,” he said. “They’re $40 or $50 million ahead of our projections just last year. The first year I was elected our revenues were dropping like a lead ball, hundreds of millions of dollars almost overnight, and now we’re getting that revenue back. So it’s that revenue that we get back that we’re going to dedicate to our taxpayers.”

I get that the car tax is an emotional issue for some people, although it has seemed to come under fire mostly for the unfairness of assessments.  But tax policy should not be determined by emotion.

Other taxes have a more negative effect on jobs and the economy.  That means not only that the state would be better off applying its tax-cutting motivation to other taxes, but also that replacing the car tax with other revenue, as Mattiello suggests above, is by itself a job-killing reform.

Additionally, shifting more decisions about tax revenue and the spending thereof to state government reduces the independence of local government, and to the contrary, that’s something of which we need more.

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