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The Examples of Private Redistribution of Tax Cut Advantage

Philip DeVoe highlights some early good news for the Republicans’ just-passed tax reform:

Earlier today, AT&T, Boeing, and Fifth-Third Bancorp announced separate plans to invest in the U.S. and pay workers bonuses with the money saved thanks to the Tax Cuts and Jobs Act. If President Donald Trump signs the bill, which passed both houses of Congress today, it will reduce the corporate tax rate by 14 percent, leading to a significant economic windfall for AT&T, Boeing, and other U.S. businesses.

DeVoe subsequently noted that Comcast-NBC Universal and Wells Fargo made similar announcements.  These announcements are dramatic and immediate illustrations of the ways in which tax cuts on businesses find their way back to Americans by other means.

Of course, a cynic might observe, for example, that AT&T currently has a big merger under review of the executive branch.  On the other hand, that cynicism should be tempered by the fact that the announcements could have come earlier, if their purpose had been to curry favor with politicians.

Speculative political intrigue aside, I’ve tried to explain for years that the incentive is not for businesses just to hand out every dollar to fat-cat executives and owners because doing so would open an opportunity for competitors to lure away talent or lower prices and capture market share.  Of course, everybody seeks their own advantage, and humanity inherently lives amidst corruption, but the idea that government can spend money better than people making decisions in their own interest and out of their own sense of responsibility is laughable.


A Mysterious Trick of Government’s Population Management

Marc Monroe Dion articulates a truth of government, particularly municipal government:

“Oops!” Government says. “That money you gave us before? We spent that. Now, we need more money.”

“More money?” you say, talking around a mouthful of that macaroni and cheese that comes in the blue box. “I don’t have any more money.”

“Oh yeah?” Government says. “Well, we’re going to lay off all the cops AND all the firefighters, so when your house catches fire, there won’t be anyone to shoot the looters.”

Well, that scares the hell out of you, so you say maybe a little tax or fee increase would be fine, and the next thing you know you’re paying $1 for every rain drop that falls on your property, and you’re buying the macaroni and cheese knock-off that doesn’t even come in a blue box.

My one quibble is that, to my experience in Tiverton, the threats start with the schools.  Dion’s writing from Fall River, so that might be a Massachusetts vs. Rhode Island thing given differences in school funding.  Or maybe it’s a city vs. suburb thing.  Safety is less of a day-to-day issue for suburbanites, and suburban parents might be more conscious of comparisons between school districts and between public schools and private schools.

Quibbles and speculation aside, though, it is discouraging how quickly government can push people past questions about where all the money went and on to fears about what services might be eliminated.


An Economy Headed in the Wrong Direction

For his weekend column, Ted Nesi draws attention to another indicator that what we’ve been saying around here for years is true — namely, that Rhode Island’s economy is headed in the wrong direction, whatever a misleading unemployment rate might suggest:

Back in November 2014, the conference projected Rhode Islanders’ personal income would total $59.8 billion this year and $61.8 billion next year. Fast-forward to last month, and the conference’s revised income forecast is far more modest: only $54.4 billion this year and $56.3 billion next year. Put another way, Rhode Islanders’ personal income in 2018 is now expected to be nearly 10% lower than forecast three years ago. That’s billions of dollars less in Rhode Islanders’ pockets than officials had thought would be there. It’s also a major contrast with the forecasts for payrolls (only about 1% lower now than was expected three years ago) or the unemployment rate (roughly a percentage point better now than was expected three years ago).

With state government insisting on keeping both its regulatory and tax thumbs on Rhode Island’s economy, the state is not a good place in which to really invest effort to succeed.  That’s why the productive class has been leaving, taking its motivation and financial resources with it.

Unfortunately, the incentives in this state are such that people in power will not change what needs to be changed, which means that voters must change them.  The remaining question is whether we’re so far down the spiral that those whose incentive is to work to keep their government-derived advantages alive as long as possible can win every time, almost without trying.


Lesson: Never, Ever Buy or Lease Property in Providence

It’s almost difficult to believe that Patrick Anderson didn’t have a typo or something in his Providence Journal article on Lehigh Cement’s non-resolution over a tax problem with the City of Providence.  The city overcharged the company $500,000 over four years.  As any ordinary individual or entity might do when dealing with municipal government, Lehigh approached the tax assessor’s office and got the run-around for a while as the office changed hands.

Finally going to court, the company has been told it will not get its money back for two reasons that are outrageously contradictory.  First:

… a Superior Court judge ruled against Lehigh and, on appeal, the state high court agreed, writing that while talking with the city about compensation, Lehigh had allowed the statute of limitations to expire.

If you’re wondering, according to Anderson the statute of limitations is three months.  That abbreviated period gives especial bite to the second reason the business couldn’t get its money back.  Even if it had beat the statute of limitations:

The court agreed with Providence’s defense that Lehigh needed to challenge its bill through the city appeal system instead of going directly to court.

It seems to me that the same government official who should have urged the company to start the appeals process was the one dragging his heals while stealing a half-million dollars from the company.

Perhaps filing an appeal stops the clock on the statute of limitations, but just to be safe, Providence taxpayers should regularly review every bill in fine detail and, when there appears to be a problem, immediately file an appeal as well as a complaint with court.  Or better yet, just stay away from Providence altogether if at all possible.


Is Reality Setting in for the Governor?

Perhaps it’s just the moment and the particular set of issues raised, but a quick-hit Providence Journal interview with Democrat Governor Gina Raimondo feels like a bit of a change in tone, from backing away from legalizing pot to holding back on school construction bonds.

A couple of points are worth teasing out:

“Look,” Raimondo said Tuesday, “I think it would be really sad if we lost the PawSox to Worcester …. But no, I am not going to get into a bidding war. We can’t afford a bidding war. We have a deal on the table now. I would say: Go ahead and pass that deal.”

“I am not going to get bid up, and pay more than we can afford, so we don’t lose it to Charlie Baker,” she said.

This is particularly nice to see.  Rhode Island has lost thousands of residents in recent decades because the state didn’t want, essentially, to bid for them to stay by making it easier to make it in Rhode Island.  Why should a minor league baseball team get better treatment?

Raimondo said her budget proposal will honor the next promised $25-million cut in local car taxes, part of a multi-year phaseout plan lawmakers approved earlier this year.

This is interesting.  Last week on the radio, John DePetro and I had some fun speculating that Democrat Speaker of the House Nicholas Mattiello of Cranston was sending signals to Raimondo.  First, he was seen chatting with her potential Democrat primary foe, Lincoln Chafee, and then his shadow could be seen around the edges of Joe Trillo’s bizarre declaration of his intent to stage a third-party campaign that would almost certainly split the vote against Raimondo.

Holding to the car tax elimination, which the speaker championed, could be a sign that the messages have been received and an agreement struck.


Business Burden Reductions Are Good, but Increased Risk Taints

Let’s acknowledge that Ted Nesi is reporting positive news, here:

Rhode Island has long had some of the highest unemployment taxes in the United States. Last year, however, state lawmakers approved a proposal by Gov. Gina Raimondo to change the formula and reduce the levy. DLT said the new policy saved employers an estimated $30 million this year, meaning the two-year reduction will total $40 million in 2018. …

Separately, DLT said the Temporary Disability Insurance (TDI) tax rate paid by workers will dip in 2018 for the first time in six years, from 1.2% to 1.1%, which the department said is the lowest rate since 1996. TDI taxes fund both that program and the fairly new Temporary Caregiver Insurance (TCI) program often used by new parents.

We should keep in mind, however, that this is a small piece of the cornucopia of big-government policies that suppress Rhode Island’s economy.  Moreover, this particular tax relief doesn’t come with any adjustment of government priorities.

Basically, these two changes are like the state’s too-high assumption about its pension returns.  The savings come from increased tolerance for risk, not from any actual change in policy.  In these two cases, the tolerance for risk may very well have been too low, but throwing businesses a bone by gambling isn’t an approach on which further reforms can build.


Money-Grabbing State Officials Seek To Tax Everything That Moves

Yet again, Rhode Island has been saddled with a bottom-10 ranking: This time for its heavy-handed occupational licensing regulatory regime, which effectively denies many people the right to earn a living. In Washington, the Trump administration is returning to a “light-touch” regulatory strategy, a strategy that our state would be wise to follow.


An Attitude That Needs Reinforcement

Maybe it’s just that I live in Rhode Island, but I don’t hear the opinion that Sarah Hoyt expresses here nearly often enough:

… “if you never balance your checkbook, you never have to admit to debt.”  But what I really like is [Democrats’] idea that they’re entitled to all of our money and that somehow not taking as much money from us as they are now means they’re “adding to the debt.”  No, what is adding to the debt is unconscionable spending.  Stop acting like drunken sailors on shore leave.  And stop putting your hand in my pocket, too.

One comes across the Big Government attitude in ways subtle and overt, but careful listening reveals the underlying belief to be that all money ultimately belongs to government.  Politicians just let us keep some of it.

We’re well past time for taxpayers to insist that enough is enough.  Our bloated, corrupt, incompetent government has no right to take our money and tell us what to do to the extent that it does, and ought to be returned to the status of working for us, rather than the other way around.


Contrasting Benny’s with State Bennies

While sympathetic to the plight of Benny’s employees whose jobs are disappearing out from under them, I can’t help but wonder how many people actually enter retail expecting benefits like severance pay.  Kim Kalunian and Ted Nesi’s WPRI article on the impending closure of all Benny’s stores makes it seem as that must be a thing, but even with a good bit of retail experience, I’ve never heard of it.

Presumably, workers were satisfied with the terms of their employment while it was ongoing.  It would be generous of the company’s owners to offer employees who happen to be working for the stores now that they’re closing an additional, unexpected bonus, but it would be above and beyond what tends to happen in the private sector.

Now contrast that situation with Kathy Gregg’s Providence Journal follow-up article on Democrat Governor Gina Raimondo’s incentive offer to near-retirees on the state’s payroll:

The retirement plan hinges on the one-time payment of an amount twice the “longevity” bonus that each worker, already eligible for retirement, is receiving. Until this bonus-pay program was frozen in 2011, the state automatically gave state workers 5-percent, 10-percent, 15-percent, 17.5-percent and 20-percent pay increases at milestones in their career, such as the 5-year, 10-year or 20-year mark. The cap on Raimondo’s offer: $40,000. …

More assumptions: the departing workers would leave with $8.94 million in retirement-incentive payments and $4.57 million in “severance payments” for all of the unused vacation days and sick time they were allowed to bank over the course of their careers. Assuming the administration replaced 252 of these workers by the end of this budget year — at substantially lower salaries — the Budget Office projected $2,608,406 in state-dollar savings this year.

We really do have two classes in Rhode Island, whose lived experiences and expectations about the world are entirely separate, and politicians (rather than workers’ talents) are the ultimate gatekeepers to the more-desirable one.  In one class, we work by mutual agreement, and all parties are tasked with assessing their own financial needs and adjusting accordingly, seeking the best deals we can as we go.  The other class collects what it needs from taxpayers and makes decisions based on the political clout of special interests (notably labor unions) before considering financial viability.

As Kalunian and Nesi report, the financial reality of defined-benefit retirement plans forced an end to the benefit at Benny’s in 2007.  The state’s, on the other hand, still stands available as another bucket of money and liability into and out of which officials can slop cash so as to create the appearance of fiscal viability in any given year.


PawSox: Suddenly a Legislative Hot Potato?

Kathy Gregg is reporting in today’s Providence Journal that

[Senate President Dominick] Ruggerio said the Senate Finance Committee will unveil a revised version of the PawSox financing bill next week, and then vote to “hold it for further study,” so the public can see it, discuss it and debate it before the General Assembly convenes for its 2018 session on Jan. 2.

Yesterday on the WPRO airwaves, Dan Yorke, an open supporter of the state’s financial participation in a new stadium for the PawSox, noted that he had been aware since last week that this would happen. More interestingly, he reported that members of the House have been urging their colleagues in the Senate “do not send us this bill”.

Interesting. Are some in the House seeing the folly, financial or political or both, of the state getting involved in a sport when far more important matters have been budgetarily neglected or outright cut? For example – and feel free to add to this list of unwise legislative priorities – of course, excessively generous state pensions had to be cut, though bringing the fund from 49% funded to only 56% funded was in no way worthy of the fawning national media coverage showered on the governor for this “feat”. But bigger picture, should public pensions take a secondary position to a very seasonal “economic development” (please, no snickers) sports project?

And as was demonstrated by both the Rhode Island Center for Freedom and Prosperity and the Republican Policy Group, headed by Minority Leader Patricia Morgan, the money to repair Rhode Island’s as roads and bridges could easily have been found in the budget. But Governor Raimondo pretended otherwise and the legislature unwisely followed her lead in passing a highly destructive and inefficient toll plan (the implementation of which is not going swimmingly). Really? Our roads and bridges are less important than the state participating in the frivolity of a sport?

What does it say about Rhode Island’s priorities if the state participates in the PawSox stadium? That needs to be the point that House members and leaders mull over as they consider the PawSox request and the Senate’s bill. Possibly, it is the basis of the quiet push-back, referenced by Yorke, that the Senate is getting from the House and that has hopefully turned the PawSox stadium into a political hot potato.


Nursing Education Center and Rhode-Island-Style Innovation

Take a moment to consider the import of this paragraph, from Ted Nesi’s report of the opening of a new combination URI/RIC nursing center and Brown University administrative center in Providence:

“This was a power plant across the street from the vibrant Jewelry District,” [Democrat Governor Gina Raimondo] said. “The economy is changing, and we’re not standing still. We’re changing with it. The New York Times just called this area, quote, ‘a busy hive of invention and collaboration.’ And so we’re changing the narrative of our whole state.”

In the past… the private market made Rhode Island a hub for a particular industry.  Now… the government collects $85 million from productive areas of the state’s economy to renovate a building vacated as the economic tide went out from the Ocean State and use it for bells and whistles at government-run universities and a wealthy tax-exempt non-profit.

Honestly, I don’t want to sound that cynical, but come on.  Now throw this into the mix:

The developer of South Street Landing was CV Properties LLC, a Boston-based firm led by Dick Galvin. Earlier this year, real-estate company Ventas Inc. paid nearly $130 million to buy the facility and a new 750-space parking garage being constructed next door from Blackstone Group LP. Ventas is the parent company of Wexford Science + Technology LLC, the developer building a high-profile innovation campus on the vacant 195 land in the same part of the city.

As I mentioned when I detailed the suspicious interconnections of the bigger Wexford deal, Ventas CEO Debra Cafaro and her husband are substantial Raimondo donors, located in the governor’s notable fundraising hot spot of Chicago.

Yeah, for the general public, renovated buildings make for nicer scenery than abandoned ones, but that doesn’t mean we should accept the surface story every time politicians proclaim the advance of public-sector-focused crony deals.  Somebody’s got to lose out, and we can be reasonably certain that it’s us.


Rhode Island 49th On The Jobs & Opportunity Index

Rhode Islanders want to prosper in an economic climate that rewards hard work, encourages small-business growth, creates quality jobs, and can lead to a better life for their families. In this regard, the traditionally cited monthly unemployment rate is often used by state lawmakers as a benchmark to evaluate the effectiveness of state economic policy initiatives. However, this rate represents a very narrow glimpse of the employment health of a state and can often paint an incomplete, or even inaccurate, snapshot of the broader economic picture.


Chris Maxwell: RIDOT’s Inadequate Environmental Assessment Intended to Accelerate Toll Bait Lawsuit

[Below are the prepared comments of Chris Maxwell, President of the Rhode Island Trucking Association, for the RIDOT toll gantry workshop Tuesday evening. The video of Chris’ actual comments, abbreviated due to time constraints, can be viewed here. For the sake of the news outlet that erroneously reported that public comment Tuesday night was mostly a re-hash of old objections and omitted all on-topic comments from their story, Ocean State Current has bolded all of Chris’ comments that pertain to the Environmental Assessment that was the subject of Tuesday’s workshop.]

Good evening. My name is Chris Maxwell and I represent the Rhode Island Trucking Association and all local trucking companies adversely affected by truck-only tolls.

Our opposition to this plan from its introduction in the spring of 2015 is well-documented. And despite the justified rancour that still exists, our industry’s willingness to contribute to infrastructure improvement remains steadfast – even beyond our existing contributions which are considerable.

In 2016, the trucking industry in Rhode Island paid roughly $70 million in federal and state roadway taxes.


Wheee! Warwick Fire Chief Puts Taxpayers On Hook for Cool $2.8 Million Fine

From the front page of yesterday’s Warwick Beacon.

[Taxpayer activist Rob] Cote claims that in the past four years the fire department has averaged about 1,400 shift changes a year, totaling about 5,600 Form 109s that are supposedly missing or have been purposefully disposed of. This could incur a maximum fine of $2.8 million, which the city would be on the hook for, according to Cote.

Cote filed an Access to Public Records Act request (APRA) in May and December of 2016 to get any documents pertaining to changes of shift within the Warwick Fire Department.

Fourteen hundred shift changes per year times four years requires 5,600 forms, each of which must be signed by four people in authority. What happened to those 5,600 forms? Where they destroyed? That is what Warwick Fire Chief James McLaughlin claims. Or did they never exist? If the latter, those 5,600 shift changes were never authorized and, therefore … what? The firefighters must pay back that money? (Asking honestly. Legal-types are encouraged to chime in on this point.)

Terrific work by Rob Cote, who worked for over a year rounding up all of this information and (lack of) documents to expose what is a scam, one way or the other — and could well turn out to be a costly one to taxpayers.

One other item from the article. This is called foreshadowing. (Emphasis added).

In response to allegations from Cote that fire department personnel had used the change of shift system to subvert using vacation or sick time in order to go work other jobs or even attend a softball tournament in Maine, McLaughlin said that he had seen no evidence of such activity, and if anybody has proof of such accusations to please bring it forward.

As they teach first year law students, never ask a question you don’t know the answer to … and government officials should never ask for proof of shenanigans unless they are 100% certain it does not exist.


The Calciphylaxis of Union Contracts

Tim White provides the numbers for the long-term leave benefit that allows state employees to change jobs with a right to return to the jobs they left:

More than 1,600 positions in state government are effectively on hold, with employees having the right to return to them and potentially bump the worker who holds the job now, according to data reviewed by the Target 12 Investigators.

For the record, 1,600 jobs is about 11% of all authorized full time jobs in the state budget.  More telling, though, is this:

“The Leave to Protect rule was developed really in large part as a management tool to encourage employees to accept promotions, take a chance on a new opportunity and later if they did not pass the exam for that opportunity they would still have the ability to go back to their former position,” [Deputy Director of the Department of Administration Mark Dingley] said.

Merit exams are no longer common with promotions in state government, Dingley said. Yet the Leave to Protect policy has expanded to cover more employees as another job protection prized by organized labor.

Merit exams go away; this aristocratic benefit just keeps on going.  Just so, the benefits and stability that used to be the public sector’s compensation for its lower pay remain in effect though government work has become increasingly lucrative.

These provisions are like calcification in the blood stream, sticking to the walls and forcing us to work harder to push the blood through.  Once again, it appears that they don’t work for us; we work for them.


Why Not the AttSox?


… By the Way, RIDOT’s New Tolling Study Has Major Problems, Too

At about the same time they issued a not-ready-for-primetime Environmental Assessment of the first two proposed toll gantry locations in southern Rhode Island, the Rhode Island Department of Transportation (RIDOT) also issued an “investment grade tolling study” of the entire RhodeWorks toll plan – a study, we should note, which cost the taxpayers of Rhode Island a cool million dollars.

During their show, “Changing Gears”, yesterday on WPRO, Mike Collins and Chris Maxwell broadly hinted at major problems with this tolling study. Maxwell remarked that the state “would have been wise to put it through the shredder because it is very favorable” to the truckers’ anti-toll position.

Stay tuned on this – or drop by RIDOT’s hearing on Tuesday to hear about it first hand. That’s when the Rhode Island Trucking Association (represented by Maxwell) and the American Trucking Association (represented by Collins) will point out chapter and verse how RIDOT’s own toll study apparently torpedoes Governor Raimondo’s highly destructive, wasteful and unnecessary RhodeWorks toll plan.

Remember, Governor Raimondo and the General Assembly are only going to toll trucks! *snort*


Hearing Tuesday on First Toll Gantries With Acute Case of UHIP-itis

RIDOT has identified the locations of the first two proposed toll gantry locations in southern Rhode Island. This Tuesday, they will be holding a workshop and taking public comment on their newly-released (not to say rushed out the door) Environmental Assessment of the locations. The problem is that the assessment suffers from exactly the same serious flaw as the ill-fated UHIP system: it was released before it was ready. “Continue Reading” to learn why – and for deets about attending the hearing.