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One Hundred New State Jobs Would Only Perpetuate Failures & Failed Approach

Both the proven failure of a budget-centric approach and Governor Raimondo’s dismal public policy track record should give the General Assembly real pause when considering her reported request for one hundred new state hires – and other initiatives, past and prospective.

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Government That Primarily Seeks To Grow Itself

We know that that the high levels of taxation and over-regulation imposed for the sake of the state budget are the primary culprit in causing the Ocean State’s stagnant performance. Put another way, overspending by a government that primarily seeks to perpetuate and grow itself, actually works against the best-interests of the very people it is supposed to be serving. Instead of seeking to grow prosperity, government seeks to grow itself.

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A Market for Flight Could Be a Market for Everything

Here’s an interesting tidbit from a Providence Journal article in which Carol Kozma attempts to answer the question, “Why are airlines growing more interested in T.F. Green?”:

Location, location, location. It’s not only good for real estate, but also for airlines.

T.F. Green is “an access point for a huge part of the Northeastern U.S.,” said Boyd, an industry analyst based in Colorado.

Sixty-four percent of New Englanders live within 75 miles of Green, according to the Rhode Island Airport Corporation.

Roughly speaking, a circle around Warwick with a radius of 75 miles catches Boston, Worcester, the beginnings of the cape, and much of Connecticut, nearly to Hartford.

Naturally, what this brings first to my mind is how big of a market is within a short drive of Rhode Island if the state were to dramatically reduce or eliminate its sales tax.  More than half of all New Englanders probably live within an hour’s drive of the Ocean State.  Extending a low (or no) sales tax to that customer base, especially with ready access (and expanding) to every form of transportation, from sea to sky to road to rail, would create huge incentive for businesses to consider Rhode Island — even without taxpayer subsidies.

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The Budget: The Progressive Approach

Despite the false hopes expressed by lawmakers based solely on a reduced unemployment rate, Rhode Island families are hurting. The Ocean State suffers under the worst business climate, and 48th rank on our Center’s Job’s & Opportunity Index. Furthermore, Rhode Island was the only state in New England to see its labor force decline in size in recent years, as hundreds of thousands of people have chosen to leave our state since 2004. This is not a recovery.

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General Assembly Must Step In – Tolls Have Taken A Dangerous Turn

Below is a statement that StopTollsRI.com (for which I am spokesperson) placed on its Facebook page last night. The R.I. Trucking Association and the American Trucking Association have announced that they would wait until all 30+ toll gantries were installed before they would challenge the legality of truck tolls in court. This alarming development first came to light Thursday night in testimony before House Finance. See Mike Collins’ testimony starting at approximately minute 1:52:40.

Tolls have taken a dangerous turn for Rhode Island residents and taxpayers. It is now imperative that state legislators and General Assembly leadership step in for the good of the state and end the truck toll program.

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Why Did RIDOT Replace the Bridge? Because It’s There.

So, we had no choice but to implement a new series of tolls on trucks under Democrat Governor Gina Raimondo’s RhodeWorks program because the state doesn’t have any spare money and we don’t have time to spare before roads and bridges crumble dangerously.  Right?

If that’s the story, this is difficult to understand:

Rhode Island Trucking Association President Chris Maxwell is calling for the immediate formation of an independent oversight committee to review bridge inspection information related to project selection under the RhodeWorks truck-only tolling plan.  …

The bridge is located on Interstate 95 in the area of the Thurbers Avenue curve. It is a 50-foot overpass that will undergo superstructure replacement at a cost of $5.7 million dollars.

“The Oxford Street Bridge has a 72% sufficiency rating which means it’s in very good shape. We have very serious concerns as to why RIDOT selected this location to spend our industry’s toll money and our taxpayer’s limited funds to essentially replace a structure that is in good condition while other bridges in our state are crumbling,” said Maxwell.

Like Tara Granahan, I’m not sure I understand why the state would have to replace the bridge in order to put toll gantries on it, which is the scheme that Maxwell alleges.  Still, if there isn’t some ulterior motive, it ought to be a relatively simple matter for the Dept. of Transportation to clarify its reasoning, no?

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Payroll Counts and Totals Under Governor Raimondo

A couple of days ago, Rhode Island House Minority Leader Patricia Morgan (R, Coventry, Warwick, West Warwick) was complaining to Tara Granahan on 630AM/99.7FM that Democrat Governor Gina Raimondo’s administration was dragging its heels on providing Morgan with information about new hires since the start of her administration.

As Tara and Patricia were saying on air, that should be an easy request for the administration to fulfill.  Filter all employees to the appropriate hire dates, and there you go.

Unfortunately, I don’t have access to that tool, but for some overall sense of what the response will look like when it comes, I visited the state’s transparency site and downloaded the payroll for the relevant years.  Note that this data is by fiscal year, and the fiscal year 2017 dollar totals are projected “annual” pay and may vary in actuality, what with overtime and that sort of thing.  Also note that this is the entire state government, so it captures everything from courts to colleges.

My method was to search for full names (including middle initial) that did or didn’t appear in each subsequent year of payroll, which isn’t perfect.  If the state for some reason had a typo on a name (skipping a middle initial) or if somebody got married, or something, these numbers will be a little off, but it does give a rough picture.

Treating fiscal year 2016 as Raimondo’s first (that’d be July 2015 through June 2016), the state government has added 458 more employees than it lost during the two years of budgets that were implemented under this governor.  Those new employees account for an additional $30,639,475 in annual pay.

new-payroll-hires-2015-2017

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Taxes and the Gig Economy

Laura Saunders’s “Tax Report” column from this weekend tangentially raises an important question — rather, an important lesson:

While some gig workers mean to cheat Uncle Sam, experts say others are bewildered by tax requirements that can be almost as complex for the owner of a microbusiness as for a much larger firm. Many know nothing about Schedule C (for a small business), payroll taxes and quarterly estimated payments. Often they’re unaware of valuable write-offs as well.

“The government isn’t getting the money it’s owed, and workers aren’t taking the deductions and offsets they’re allowed,” says Caroline Bruckner, managing director of the Kogod Tax Center at American University, who studies microbusiness issues. In a survey she conducted of self-employed business owners working in the gig economy, 69% reported receiving no tax information from the platform they used.

Bottom line: the tax system is too complex.  That alone hurts our economy and innovation.  Sure, maybe the IRS and state and local governments could come up with ways to make taxes easier to pay, but nothing would beat a simple flat rate based on income.  Simply take your income and multiply it by the universal rate, and there’s your tax.

That also has the benefit of reducing incentive to use government to take other people’s money for yourself.  Take away withholding, too, and people will have every reason to assess the value of the services for which they’re being taxed.

Of course, complexity is exactly what the government wants, creating plenty of opportunity to take too much, plenty of reason to hire more tax collectors, and a weapon to use against the public when wanted, not only with the punishment of an audit, but with the reality that most people will have at some point done something that they shouldn’t have, inadvertently or otherwise.

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Avoiding Unions for Innovation and Prudent Decisions

Wall Street Journal editorialist Allysia Finley conveys the perspective of Braidy Industries CEO Craig Bouchard, who is opening an aluminum mill in right-to-work Kentucky.  Regarding an earlier company, experience with which soured Bouchard on organized labor:

They sold it for $1.2 billion to the Russian steelmaker Severstal in 2008, shortly before the stock market and steel industry crashed. Thousands of workers subsequently lost their jobs. Mr. Bouchard blames the United Steelworkers. He had first tried to sell a partnership stake in Esmark to the Indian company Essar Steel. But the United Steelworkers sought to force a sale to Severstal, which the union perceived as more labor-friendly. Had the Essar deal been consummated, Mr. Bouchard says, “every one of those people would have their jobs today” because all of the company’s debt would have been paid off.

Obviously, this is one side of that story, but the moral from the CEO’s point of view is that business decisions should be left to business owners.  That includes other pitfalls of unionization, like work rules that constrain activities beyond what the employer and employee would accept if left to their own and other costs, like pensions.

The key part of the op-ed, though, may be the bigger picture.  Bouchard’s new company is built on innovation in the metallurgical sciences.  Our broader tax and regulatory regime slows down that sort of innovation.  Another culprit is an unhealthy aversion (across the ideological spectrum) to allowing “creative destruction” to usher out old technologies and ways of doing things and ushering in the new.

A society should provide leverage for workers as the capitalism charges forward, but labor unions, protectionism, and regulation don’t appear to be sufficiently effective.  What we need is something broader, more cultural — dare I say, more spiritual — that allows us to make individual decisions and negotiations within a framework of mutual respect and support.

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The Budget: RI Government Seeks To Grow Itself, Not the Economy

Should the hopes, dreams, and aspirations of Rhode Island families be limited by an arbitrary, politically-driven budget number at the bottom of a spreadsheet? Unfortunately, our state is now suffering the consequences of such an approach, fueled by the progressive-left’s big-spending agenda.

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About the Other Stadium…

Tim White raises an important point that seems to have been avoiding discussion related to the PawSox deal:

If approved, there will be another cost associated with building a new stadium in downtown Pawtucket to host the PawSox: tearing down McCoy Stadium.

The city of Pawtucket owns the land that 75-year-old McCoy is on, and officials have indicated there are no plans to keep the ballpark if the PawSox leave, whether by moving across town to the proposed Apex site or out of state.

The options on table range from likely to certain to require more government money and debt.  Rebuilding the high school on the spot will mean a big bond and a state taxpayer fund match and still leave the city with a plot of land to repurpose or dispose of.  A private buyer would probably negotiate and receive subsidies for some part of the property redevelopment.  Or just leaving it alone will mean a tax-free chunk of land in the city.

Whatever the final ask for the new stadium is, don’t forget that the project isn’t done with taxpayers, yet.

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Talk Property Taxes in Real Terms

Here’s a worthwhile exercise.  Pick a house value — the median for your town, perhaps — and search your town’s tax rolls for every house of about that value.  Then go back a few years, find the same houses, and see how things have changed.

For Tiverton, I used $260,000, which is around the median for the town, with this result:

In 2009, which is the first year for which the town has tax rolls that are easy to search on the computer, those same households paid $4,231, and the average value of their homes was $294,843. In other words, each family is now paying $744 more in taxes, even though each house is worth about $35,000 less.

Of course, that doesn’t tell the whole story because for the past three years, voters have used the [financial town referendum] to keep their taxes from increasing more than 0.9%. From 2009 to 2013, before the first zero-point-something FTR, those 37 taxpayers lost 14% of the value of their homes, but their actual tax payments went up 16%. Does that seem fair? Would Mr. Edwards tell his neighbors, “Hey, don’t worry! We ‘only’ added $166 to your tax bill every single year, and you ‘only’ lost $11,563 of your house’s value each year”?

Those who run government, and those who profit from it, are focused on their expenditures and finding ways to get taxpayers to keep handing over more and more money for their use and personal gain.  Hey, $166 added per year is only $3 per week.  If everybody in town would just skip a couple of coffees every week, they can collectively hand over millions more of their dollars to the town government.

Of course, after a few years of that, the entire town has had to give up the pleasure of coffee altogether, but it’s for the greater good, right? And we can feel comfortable letting the people who benefit from the money decide what the greater good is, can’t we?

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The Corporate Welfare Strategy Has Failed

The massive budget shortfall is proof that the state government’s corporate welfare strategy has failed. Rhode Island’s current corporate tax-credit economic development strategy is highly inefficient as it creates relatively few jobs at an extremely high cost per job to taxpayers. This targeted ‘advanced industry’ approach does little if anything to improve the overall business climate, which is necessary if organic entrepreneurial growth is to occur on its own. A 3.0% sales tax would disproportionately help low-income families.

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Mild Nod to Pension Reality Shows the Scam

You have to laugh (lest you cry) at the gimmicks of state government financing.  Rhode Island General Treasurer Seth Magaziner is preparing to lead the state Retirement Board in reducing the pension fund’s discount rate (that is, the assumed investment return) from 7.5% to 7.0%.  For the record:

The pension’s investments lost 0.27 percent in fiscal 2015-2016 and have gained 5.75 percent over the prior five fiscal years and 4.8 percent over 10 years.

Our investment assumption should be no more than 4.5%, because this assumption is supposed to be what we can reasonably guarantee the investments will yield.  Unfortunately, the pension fund’s assumptions aren’t really meant to help the state plan accurately; they’re meant to hide the real cost of benefits that politicians have promised to unionized employees.  As I’ve gotten Tiverton’s investment advisors to admit, the high investment assumption actually has built into it the willingness of elected officials to increase taxes down the road to cover shortfalls.

Notice, for example, that the treasurer’s plan delays increased payments for a year.  That’s a political concession, not a financial one.  Again, making the pension system work in the way that has been sold to taxpayers and employees is not the primary goal.  Helping politicians get away with bad management and crony deals is.

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The Mysterious Missing Government Revenue

I’ve got to give it to University of Rhode Island economics professor Len Lardaro.  He issued a good line upon hearing Democrat Governor Gina Raimondo blame the Trump administration for Rhode Island’s just-announced revenue gap:

Revenues are falling because we are looking to Washington? What a joke. Growth is slowing. Does she think it is sunspots, perhaps?

Ted Nesi highlights a big shortfall in the expected corporate income tax revenue, which jibes with my running hypothesis.  Within the last decade, Rhode Island government has made a number of tax changes to make it seem as if politicians were doing something to address our sluggish economy, including to the corporate income tax.  These changes have all been gimmicks, though — lowering rates by shuffling around how taxes are calculated.

My theory is that these reforms weren’t revenue neutral at all, but were instead effectively tax increases.  This made revenue come in higher than expected for a few years, because taxes had been increased, but it actually put more drag on the economy.  Under that scenario, what we’re seeing in Rhode Island is the end of that effect, as projections based on the illusion of growth out-pace the economy.

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Booze Confirms: Sales Tax Sauce for Art Is Sauce for Everything Else

In case you (especially my fellow tea-totallers) hadn’t heard: in 2013, RI removed the sales tax on wine and spirits.

Coincidentally, that was also the year, at the urging of then-Senate President Teresa Paiva-Weed, the state removed the sales tax on art; more specifically, “original and limited edition works of art sold in the State of Rhode Island” were made exempt from state sales tax.

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A Tax Lesson Next Door

Well, the WTNH headline out of Connecticut is just about all you need to know: “Income tax revenue collapses; Malloy says taxing the rich doesn’t work,” but here’s a brief explanation:

Connecticut’s state budget woes are compounding with collections from the state income tax collapsing, despite two high-end tax hikes in the past six years. …

It’s happening because the state of Connecticut depends too much on its wealthy residents, and wealthy residents are leaving, and the ones that are staying are making less, or are not taking their profits from the stock market until they see what happens in Washington.

Rhode Islanders should consider that this goes in reverse, too.  Lower, broader taxation will foster the import of wealth and productive activity within the state.  For a quick lesson, see Thomas Sowell’s latest post-retirement essay.

For progressive governments in the Northeast, the whole purpose of a civic entity (like a state) is to construct the perfect society as they see it.  This doesn’t work.

For classical liberals (now called “conservatives”), the purpose of a civic entity is to provide some structure and security for the society as a whole (as distinct from the security of an individual or particular organization).  This does work, and should be the focus of our state.

Government should be small enough in scope that a broadly applied tax won’t hurt the less advantaged.  In that way, we’ll have prosperity and greater economic mobility, or opportunity for people to climb the ladder.

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School Buses and Regulatory Truancy

Students in Tiverton and elsewhere are having difficulty getting to school on time and parents are being made late for work because of a bus driver shortage, as Marcia Pobzeznik reports in the Newport Daily News.  Here’s the bus company’s explanation:

The company has tried every way possible to attract potential drivers, [First Student Transportation General Manager Bill Roach] said. It has put up billboards at bus stops and advertised at movie theaters.

“We’ve gone to football games, local markets,” Roach said.

The efforts have succeeded in getting 56 candidates into the state’s 50-hour training program, he said. But it takes 20-30 days to get an appointment for a road test.

“It’s very discouraging. The road testing is the choke point,” Roach said.

There are just one full-time and two part-time road test agents for the entire state. They not only have to certify new drivers, but re-certify existing drivers, he said.

So, the state has set up an arduous regulatory regime for bus drivers.  That is, the state has artificially restricted the number of bus drivers by requiring candidates to be approved (and reapproved and reapproved) by the state.  And then the state doesn’t supply the road test agents (or some other system) to handle the demand for this mandatory service.

The state has to begin choosing its priorities, because from UHIP to the DMV to bus driver certification to infrastructure to everything, it isn’t accomplishing the basic tasks that it has set for itself.  Of course, there’s money for crony capitalist tax breaks, flashy videos promoting the governor, vote-buying schemes by legislators, and disproportionate pay and benefits for union employees.

Given the tax burden throughout the state, money cannot be the issue.  The issue is a government that claims for itself too much power and won’t use the bountiful resources it has to accomplish the tasks that it therefore must undertake.

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Boom! Wine & Spirits Sales Increased 21.4% After Sales Tax Cut

Imagine the parking lots of Rhode Island retailers filled with cars with Massachusetts license plates. New research from the Center, based on government data, shows that it is very possible. In the two years following the removal of sales tax on wine and spirits, the same level of economic stimulus, as projected by the Center by cutting the state’s overall sales tax, actually occurred! Now, there can be no doubt of our findings. The new research one-pager proves that Rhode Island would experience an ECONOMIC BOOM under a 3.0% sales tax.

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Are RI’s Wealthy Liberals Willing to Pay Their Fair Share?

The American Interest highlights an issue that ought to be a big topic, in Rhode Island, related to President Trump’s tax reform proposals: the federal tax deduction for state and local taxes.

The deduction overwhelmingly benefits six-figure earners. The benefit is largest for affluent people living in states that impose high income tax rates, which are much bluer than average. …

Some SALT opponents will claim that the measure would create a system of “double-taxation,” and they aren’t entirely wrong. But if this were really the concern, states could address it by making federal tax deductible from state tax bills. Of course, that would impose new costs on states, just as SALT imposes costs on the federal government. This is at its core a fight over resources, and it’s one that the working class deserves to win more than coastal high-flyers.

Rhode Island would take a hit if this proposal were to pass, but it’d be deserved.  More importantly, it has the easy remedy of lowering spending and local taxes.  Ta-da!  Problem solved!

The post makes another significant point:  The deduction takes the pressure off of relatively wealthy Rhode Islanders to get involved and hold their government accountable.  After all, the additional taxes that result are deductible on their federal taxes.  If it were not, such folks would have more incentive to take an interest in how things really run around here.

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