The governor proposes (arguably) double-taxing online sales while ignoring a law that requires a sales tax reduction when the state starts taxing them once.
It isn’t true that Raimondo’s corporate crony tax credit programs mainly use new taxes from the companies that get them, even the Qualified Jobs handout.
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.
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.
In India innovation is turning coal exhaust into baking soda; in Somerset, environmentalists are turning waterfront property into a useless plot of land that is a drag on local taxes and the economy.
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.
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.
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.
It isn’t clear that eliminating the car tax would actually increase sales in Rhode Island, and we can’t afford to let politicians manipulate us by our emotions.
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.
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.
Policies that start by asking what’s best for inner city families will be conservative in nature and will prove activists who thrive on urban angst to be demagogic frauds.
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.
The populism of Trump puts pressure on conservatives to propose a comprehensive revision of their typical playbook, and the RI Center for Freedom & Prosperity may have a helpful suggestion.
Put aside any partisan — or individual-politician — loyalty. Clark Judge offers a valuable lesson for Rhode Island in his recent Wall Street Journal article, “The Rust Belt Is Right to Blame Obama“:
First, and no surprise here: From 2010-15 regulatory risk jumped—an average increase across all industries of 79%.
Second, and more surprising: As regulatory risk climbed, annual capital expenditures fell, a total drop of nearly $32 billion when comparing 2010 to 2015. This negative relationship was strong across the board, but it was statistically tightest for “industrials” (heavy manufacturing plus railroads and airlines).
Third, as regulatory risks grew and capital expenditures shrank, major corporations also cut jobs by more than 1.1 million. Among the biggest losers were heavy manufacturing, airlines, railroads, information technology and consumer products—America’s industrial core.
Fourth, while the business of making things and moving them to market was eroding, the value of gaming the government increased. The Vogel and Hood team constructed two trial portfolios composed solely of companies that ranked high in lobbying strength. From 2010-16 these portfolios outperformed the S&P 500 by 22% and 27%.
In short, with the expanded reach of regulation (as well as the increased propensity to continue that expansion), companies stop investing in their businesses, both their capital and their labor, and focus attention increasingly on getting government to help them out. This has obvious benefits for elected and appointed government officials, and it has benefits for established companies that game the government in a way that hobbles their competition. But it hurts everybody else, from entrepreneurs to workers, and leads to inevitable decline.
This dynamic covers regulation, taxation, and even the Raimondo-esque corporate welfare programs that compensate politically favored companies for the inconvenience of doing business here, and it’s an across-the-board failure. Not only are more-innovative companies washed out, but the companies that survive produce less and innovate less, because they’re focused too much on redistribution.
Forcing our elected officials to get us off this one-wheeled bandwagon — focusing instead on family prosperity — should be Rhode Islanders’ resolution for the new year.
The thing about handing out other people’s money for political gain is that it’s very, very easy to look only at the upside, because the future is, obviously, not yet known, and when it arrives, few will check the record, and responsible parties may no longer be in place, anyway. Thus, Democrat Governor Gina Raimondo is free to say things like this, from a Ted Nesi article on Johnson & Johnson’s agreement to put a location in Providence with 75 employees for the low-low government welfare handout of $5 million:
And 10 years from now, when GE has 700 employees there and J&J has 700 employees there and Virgin Pulse has 700 employees there and it’s tens of millions of dollars of revenue for the state, great, I did my job.
Note the assumption that the government can pick these winners. It sounds great to think that every one of these subsidized companies will succeed and expand by multiples over the next decade, but if that were feasible to expect, investing would be easy.
Meanwhile, the money handed out to them won’t be in the state’s economy serving other purposes that might be more productive. The simple fact of these companies’ competing in the Rhode Island market with the benefit of subsidies will have a largely untraceable effect on others. And we can be confident that some of them will seek more public money down the road (like 38 Studios) to secure the state’s “investment.”
Moreover, we’re already seeing the insidious contagion of corporations’ government dependency:
A.T. Cross, the maker of fine-writing instruments and accessories founded in Providence in 1846, celebrated its move back into the capital city from Lincoln on Wednesday, after nearly $1.9 million in economic incentives from the state helped fund the company’s $2.1-million move.
Taxpayers are nearly paying the whole bill to move this company from one Rhode Island municipality to another.
The economic system that these money-grubbing companies are ushering in is clearly unsustainable. The key marker of success will quickly become whether a company has the political connections or leverage to get money from the government to offset the high taxes and suffocating regulations.
Responding to a question related to my finding that ShapeUp, which made news recently when its new owner, Virgin Pulse, agreed to remain in Rhode Island in exchange for $5.7 million in state-government subsidies, a Rhode Island House spokesman tells me that the Economic Development Corp. (EDC, now the Commerce Corp.) and Dept. of Health weren’t the only government agencies that whet the company’s appetite for taxpayer dollars.
Disgraced and imprisoned former Speaker of the House Gordon Fox, a progressive Providence Democrat, directed $12,000 to ShapeUp through the General Assembly’s controversial legislative grant program. The first $7,000 installment of that money arrived in 2007, shortly after the non-profit started. Another $5,000, half in 2010 and half in 2012, flowed the company’s way as it moved toward for-profit status and received its $100,000 EDC handout.
One wonders how much companies that buy Rhode Island start-ups consider the many paths of claiming Rhode Island taxpayer dollars when shopping for acquisitions.
The big dirty little secret about renewable energy is that it is very expensive. Pointing to the “extraordinarily poor value” of return BY THE EPA’S OWN STANDARD in carbon footprint reduction, the Rhode Island Center for Freedom and Prosperity earlier this year called on the State of Rhode Island to significantly roll back renewable energy mandates.
Fast forward to last week. The Empire Center for Public Policy’s Kenneth Girardin alertly spotted that the State of New York has done almost exactly that for 2017.
The state Public Service Commission has quietly reduced the amount of renewable energy that utilities will have to purchase next year by 94 percent, according to PSC documents.
Kudos to New York for quietly modifying their mandate to conform with reality, even if it’s just for one year. For the sake of their already over-burdened ratepayers who have no obligation to fund pointless, feel-good, very expensive energy sources, Rhode Island and all other states need to follow suit, and not just for one year.
What if we were to realize that the status quo public policy approach, as well-intended as it may be, in reality, has had the unintended consequence of reducing the overall prosperity of our Rhode Island families? The Family Prosperity Index (FPI) research clearly demonstrates that cultural, social, and demographic factors must also be considered, in addition to economic factors, when formulating effective public policy. The Ocean State’s political leaders can become heroes if they can make policy that addresses the real needs of Rhode Island families.
Over three years, Virgin Pulse will introduce enough new jobs to undo this one month of employment increases, even as it continues ShapeUp’s practice of relying on government handouts.
Deep disagreements on something as minor as corporate income taxes suggest we’d do well not to put to many questions in the federal arena.
There is something very wrong that the State of Rhode Island has to actually pay someone an eye-popping $6,400,000 per acre in order to get prime land in the capital city developed.
Rhode Island Center for Freedom & Prosperity CEO Mike Stenhouse often refers to the value of “a paycheck, not a welfare check.” Rich Lowry suggests President-elect Donald Trump is on the same page:
Trump hammered away at the true bottom line of the economy for most people. Mike Konczal, a fellow with the liberal Roosevelt Institute, went back and listened to Trump stump speeches after the election to better understand how the mogul pulled off his upset. Konczal notes that Trump “never mentions poverty. And while he talks a lot about reducing taxes, he never talks about increasing transfers, redistribution, or access to core goods. He talks about wages, full stop.”
And that’s the key to Trump’s economics. If you squint just right, you can see a strategy. It is to increase growth through traditional Republican means (i.e., tax reform and deregulation) at the same time, he aims to directly create a tighter labor market through soaking up labor via an infrastructure program and reducing foreign competition by discouraging outsourcing and squeezing immigration.
Related principles applied to Rhode Island would focus on workers both by decreasing the incentive for them to enter into dependency on government programs and by increasing the resources and liberty at their disposal to expand their work and, if they choose, build their own businesses (that is, reducing taxes and regulations). Instead, the champions of the status quo in the Ocean State are striving to make more of us dependent on government (through, e.g., UHIP and continually expanding social welfare programs), to attract people to the state who will require government assistance (for the government plantation), and to give government-selected businesses an edge against their local competition by taxing others more to tax the favored companies less.
This is unambiguously the choice Rhode Islanders face, and it has to be made again and again. For example, infrastructure projects to “soak up labor” are sorely needed, both for jobs and for public safety, but the choice is whether to increase the tax/toll/debt burden or to redirect funds that currently foster dependency to help independent workers.
Nobody doubts that Stephen Moore has a particular perspective and a personal stake in advancing it, but here’s a tidbit he provides in The Washington Times that Rhode Islanders should read with some thought to how we allow our ruling class to run things around here:
I’m talking about an economic depression in the blue states that went for Hillary. Here is an amazing statistic. Of the 10 blue states that Hillary Clinton won by the largest percentage margins — California, Massachusetts, Vermont, Hawaii, Maryland, New York, Illinois, Rhode Island, New Jersey, and Connecticut — every single one of them lost domestic migration (excluding immigration) over the last 10 years (2004-14). Nearly 2.75 million more Americans left California and New York than entered these states.They are the loser states. They are all progressive. High taxes rates. High welfare benefits. Heavy regulation. Environmental extremism. Super minimum wages. Most outlaw energy drilling. The whole left-wing playbook is on display in the Hillary states. And people are leaving in droves. Day after day, they are being bled to death. So much for liberalism creating a worker’s paradise.
There’s a reason our neighbors are leaving, and whatever your beliefs about social issues or the abstract role of government, you can’t really be humanitarian when the regime you support is forcing people to leave their homes. The fact that our state remains preferable to third-world countries (or near-third-world countries) doesn’t mitigate the message.
Our place on Moore’s list is a warning sign we should have heeded long ago, and it’s one we’ve got a good excuse to explore at this point in our state’s history.
I recently came across this Rhode Island Public Radio (RIPR) Bottom Line segment from August, in which Dave Fallon discusses with Providence Business News Editor Mark Murphy the value of business incentives financed at taxpayer expense. At one point, Murphy mentions an Attleboro company that the state promised $500,000 of incentives over five years to move 20 employees over the border and to hire eight more. He insists that the deal works out to less than $4,000 per job, which he clearly implies was a worthwhile use of taxpayer dollars.
This sort of thinking reveals a systemic desperation that has worked its way into the psyche of Rhode Island opinion-makers. So what if Rhode Island technically has a few more jobs on paper? The likelihood that the 20 existing employees will move based on a corporate hop over the border is low, and the likelihood that any movers would choose high-tax Rhode Island is even lower. As for the eight new jobs, they’re scarcely more available to Rhode Islanders than they already would have been.
Putting that aside and looking more generally, to believe that this $4,000 per job is worth the expense, you have to believe that (1) the jobs wouldn’t have happened anyway and (2) the money given to the company wouldn’t have been used for something better if left in Rhode Islanders’ own accounts. After all, if we believe that a relatively small subsidy is creating new jobs, there’s no reason to believe that the market wouldn’t have found an even better use than moving an existing company a few miles. Somebody, somewhere — or maybe multiple people in multiple places across Rhode Island — was not able to do something that might have been more valuable, in the long run, because politicians claimed the authority to pick a company for giveaways.
What taxpayers actually bought with this half-million dollars was a quick talking point for the state’s Secretary of Commerce, Stefan Pryor, allowing him to proclaim the success of Democrat Governor Gina Raimondo’s policies on the grounds that people are willing to take free money that she claims the right to dole out.
Looking at a charter school debate in Providence and a home schooling question in Tiverton, the guiding principle of the state’s education system appears to be whether special interests can profit from a particular policy.
So as you probably know, Rhode Island’s new computer system (UHIP) for qualifying applicants and disbursing social program benefits is a mess. The problems have been well publicized to the point of infamy: a backlog of applications; benefit payments delayed; nursing homes (who have no easy way to stop their expenses) wracking up serious amounts of uncompensated care; even a security “glitch” that could have exposed the personal information of 200-1,000 customers.
It has gotten to the point that the feds were compelled to step in again – this time, breathing fire.
The agency continued to warn that the DHS could soon lose federal funding for administrative costs because of the system’s “failure to meet FNS statutory and regulatory requirements.”
And a Rhode Island House committee held its second hearing into the matter on Monday.
The question is, who is responsible for all of this? Was this a failure by the vendor setting up the new system, Deloitte Consulting? Or did the Raimondo administration force a transition to the new system from the old too quickly? (This, in fact, was a blunt warning by the feds to the Raimondo administration in early September.) If so, why?
In order to shed some light on the matter, the Providence Journal’s ace reporter Kathy Gregg sent the Raimondo administration an APRA request on September 7 for
all correspondence between the state and the company that designed it: Deloitte Consulting.
We pause here to go back, review and note that the subject of Gregg’s request was “correspondence”.
Gregg reports in yesterday’s Providence Journal that six weeks later – on the night before Thanksgiving, to be precise – the Raimondo administration gave her a thumb drive that purported to respond to the request. It contained only reports from Deloitte – and those only through September 6. Critically, the thumb drive contained no correspondence whatsoever between the Raimondo administration and Deloitte.
To reiterate: Gregg asked for correspondence. What she got was reports. (In the same way, Gregg might ask a Raimondo-operated fruit stand for a bag of oranges and receive, instead, a small bag of turnips.)
This non-responsive response by the Raimondo administration would appear to conform to neither the letter nor the spirit of Rhode Island’s APRA law. Nor is it the action of a Governor who, in an interview with Rhode Island Public Radio thirteen months ago, claimed to be “deeply committed to transparency”.
I asked the CEO of the Rhode Island Center for Freedom and Prosperity (full disclosure: I work with the Center), Mike Stenhouse, if he had a reaction to this. He responded,
A curious, honest, and relentless free-press is vital to preserving democracy in our free society and in holding elected officials accountable to the people. In this case, the administration’s pitiful non-response certainly makes it appear as if they have something to hide.
When a reporter like Kathy Gregg asks questions, she isn’t just asking for herself and her newspaper, she makes the request on behalf of all Rhode Islanders. Something went wrong with the launch of a major new state computer system – a system, remember, that has come in at over triple the originally budgeted cost. We are all minimally owed answers about the why and how of all of this. It is time to move from the dodgy non-responses to the straight answers and transparency to which the Governor herself has indicated that she is “deeply committed”.
Writing in the Washington Examiner, Paul Bedard lists some programs for American citizens that are seeing their funding drained in order to pay for services for illegal immigrants making their way over the border:
The Department of Health and Human Services is raiding several of its accounts, including money for Medicare, the Ryan White AIDS/HIV program and those for cancer and flu research to cover a shortfall in housing illegal youths pouring over the border at a rate of 255 a day.
HHS is trying to come up with $167 million to fund the Office of Refugee Resettlement that is accepting the youths, according to the Center for Immigration Studies. …
The money, [Policy Director Jessica Vaughan] said, pays for “shelters, health care, schooling, recreation, and other services for the new illegal arrivals, who typically were brought to the border by smugglers paid by their parents, who often are living in the United States illegally.”
I’m most definitely not one to assume that the eight specific transfers mentioned will not come from waste, and I’d rather use money that’s already been confiscated from taxpayers (or put on our massive debt tab) to provide basic necessities for poor children anywhere in the world than to fund the adult-entertainment habits of employees of the federal government (for example).
But the article is useful in framing a basic policy reality. As a point of fact, money spent on welfare and other services for illegal immigrants necessarily comes from some other expenditure, whether reducing government services for citizens or leading to more taxes.
For that matter, it’s worth reminding people that money collected through taxes, fees, and fines doesn’t just appear out of people’s bank accounts. It necessarily means the money isn’t spent on something else, especially in an era in which vanishingly few people truly keep cash lying around unused.
Even those who are willing to simply brush aside questions about the government’s right to take people’s money away to pay for things that powerful people value still have to ask whether the thing to be purchased is worth sacrificing the things not purchased. Too often, we allow government officials and their satellites to spend money as if there is no downside to doing so.
Without the motivation of the government plantation, Americans would find their comfort point and compromise on immigration.
Providence Business News Web editor Lori Stabile notes Rhode Island’s continuing poor performance on the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI):
Rhode Island’s score fell to 17.5 in October from September’s 17.9 on the index, which ranks states on a scale from 0-100 on factors including job outlook, which measures optimism that adequate work is available; freedom factor, which measures the level of work against reliance on welfare programs; and prosperity factor, which measures the financial motivation of income versus taxes.
Of all the factors, arguably the clearest cut is the prosperity factor, which is literally a ratio of personal income (including investments and rental income) to state, local, and federal taxes. The data shows that RI’s ratio puts personal income at 2.4 times total taxes collected, which is the fourth-smallest ratio in the country.