Taxation RSS feed for this section
mike-stenhouse-avatar

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.

justin-katz-avatar-smiling

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.

justin-katz-avatar-smiling

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?

mike-stenhouse-avatar

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.

justin-katz-avatar-smiling

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.

justin-katz-avatar-smiling

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.

monique-chartier-avatar

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.

justin-katz-avatar-smiling

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.

justin-katz-avatar-smiling

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.

mike-stenhouse-avatar

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.

justin-katz-avatar-smiling

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.

justin-katz-avatar-smiling

The Many Methods of Expanding Government’s Role

Although fully aware that I’m (let’s say) unique, I still think bottle deposit charges ought to outrage people.  The idea of the charges was to give consumers some incentive to recycle bottles and cans, but Susan Haigh reports for the Associated Press on how that rationale continues to transform into something else:

In Connecticut, distributors were allowed to keep the unclaimed bottle deposits to help offset the costs of running the program, but state officials decided in 2009 to use that money — about $34 million each year — to help balance the government’s budget.

Step 1: Use some public purpose as justification for the creation of a new funding stream, claiming (don’t worry) the government’s intentions are wholly dispassionate.  Step 2: Spot a big pot of money that government can contrive a justification for taking, and take it.

And now:

Connecticut, Massachusetts and Iowa are among the states where bills have been proposed to replace the bottle deposits with a tax. Supporters say the tax revenue could support recycling efforts that did not exist when the bottle redemption systems were introduced.

Thus does the government essentially open up a line of business in recycling.  What started as an incentive charge that government imposed, but from which government did not profit, is becoming an excuse for government to process money for a particular activity.

Liliana Rutler and Rosie Woods report on another line of work the government of Massachusetts is edging toward entering:

Sheriffs urged lawmakers Monday to use the legalization of marijuana as an opportunity to invest in substance abuse treatment. They are urging state lawmakers to increase the tax on pot from 10% to 15% to pay for those treatment programs.

Step 1: Legalize an illegal industry.  Step 2: Effectively turn it into a government-monopoly.  Step 3: Find new sideline businesses such as treatment for those who abuse the government-monopoly substance.

mike-stenhouse-avatar

You Can Save Rhode Island From Progressive ANTI-JOBS Agenda!

As taxpayers continue to be asked to fund generous corporate subsidy programs, lawmakers are now dueling over two new spending ideas, reimbursing localities to phase-out the car tax and public funding for free college tuition, each of which would likely further raise taxes and fees on Rhode Islanders. But would these programs make Rhode Island a better state? Not only does cutting the sales tax to 3.0% make sense for improving our state’s troubled economy, it is also the cure to the dangerous progressive agenda.

The four major PROGRESSIVE legislative initiatives that Rhode Island families and business owners should be worried about are:

justin-katz-avatar-smiling

The Measure of Debt in Rhode Island

The debt study put out today by the state treasurer’s office merits a more detailed look than I’ve been able to do today.  For the quick summary, see Ted Nesi’s article on WPRI:

The $10.5 billion in total public debt – excluding pensions – breaks down as $1.9 billion for Rhode Island state government, $6.6 billion for quasi-public state agencies such as Rhode Island Housing and Commerce RI, and nearly $2.05 billion for municipalities and local special districts. With pensions, the combined total rises to $17 billion, Magaziner’s office said. …

… The study suggests a community’s debt and pension liabilities should be less than 6.3% of its total assessed property value; in Providence that ratio is 17.8%, and in Woonsocket it’s 20.3%. Central Falls, Pawtucket, Johnston, West Warwick and Cranston are also above the target.

One question Rhode Islanders should consider is whether assessed property value really ought to be the measure.  Assets are certainly important to the question of debt, but mainly from the perspective of the lender, not the borrower.  For your mortgage, banks want to know your property value and other assets because they’re looking at the likelihood that you’ll be able to liquidate and pay them back if things go wrong.  That’s not really possible for a state (even “a state for sale,” as Rhode Island has been called).

From the perspective of the borrower, income is more important, because it relates to the ability to pay off the loan.  In that regard, we can look at the matter in two ways.  Rhode Islanders’ personal income (including investments) is about $44.5 billion, which means that even using the treasurer’s unrealistically sunny estimate of pension debt, government debt is about 40% the size of our income.  And of course, personal debt would come into play when thinking about personal income.

The second way to look at the public debt would be public revenue, and Rhode Island’s state and local tax revenue totals around $6 billion.  So our government owes about three years’ worth of revenue.

Each man woman and child in the state owes $17,000, around $68,000 for a family of four.  Whatever arbitrary benchmarks politicians may pick, that’s too high.

justin-katz-avatar-smiling

Picking Statistics to Push for More Taxpayer Funding of Higher Ed

Budget season has arrived in Rhode Island, which means it’s time for credulous journalists to pass along spin from powerful insiders preaching the need for more taxpayer funding.  Here’s Linda Borg, in the Providence Journal:

Rhode Island ranked 41st in the nation on state spending per student in public higher education during the 2015-16 school year.

Among the six New England states, only Vermont and New Hampshire spent less on their public colleges, according to a report from the Center on Budget and Policy Priorities, a nonpartisan research institute in Washington, D.C.

The latest data also show that Rhode Island’s support for higher education declined 23 percent from 2008 to 2016. By contrast, the national average dropped 15 percent.

Two factors make this line of argument highly misleading, to the point of spinning things around backwards from how we ought to look at them.  First, as I’ve written before, a business model is absolutely bizarre if an increase in customers creates a shortfall in revenue.  To the extent that each additional student’s tuition exceeds the marginal increase in costs per student, higher enrollment should mean more money.  And to the extent that the student’s tuition falls short of the marginal increase, the increased enrollment indicates room to increase tuition.

The CBPP’s “drop” in funding is calculated per student.  That means that states with big increases in enrollment will show a “drop” in funding, even if funding goes up substantially.

Second, as I’ve also written before, Rhode Island has a high percentage of out-of-state students.  Here again, success would show as failure by CBPP’s measuring stick.  Out-of-state students should be a source of additional revenue helping the public colleges and universities fulfill their primary role of providing educational opportunities for the people of the state.  Yet, the more we attract, the lower our funding will appear to be per student.

In summary, if our colleges and university are being successful, attracting more students from in state and out of state, they will appear to be losing public funding.  If it weren’t government, these arguments would be a scam.

mike-stenhouse-avatar

Save RI: The Progressive “Fair Shot” Agenda Is Really A “No Shot” Agenda

Happy Easter! As President Franklin Delano Roosevelt, the creator of the American social safety net state said in 1935, “Continued dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber. To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.” Rhode Island Lawmakers need to realize that our policy culture of considering only the material needs of individuals has, all along, been harmful to the family unit.

Yet, the progressive left is openly promoting job-killing, anti-business, and anti-family policies.

justin-katz-avatar-smiling

A State Without Children

Way down in his weekly roundup column, Ted Nesi highlights another point from the recent RI Kids Count report:

One statistic that stood out: Rhode Island now has the fifth-lowest birth rate in the country, following a 15% slide in the number of babies born here over the last decade. What does that mean for the state’s future? It’s already having an effect on the economy, with Care New England saying the decline in births is hurting revenue at Women & Infants.

That’s an understated example of the effect of this dynamic.  Indeed, it would be difficult to overstate the effects of an increasingly sterile population.

To touch on one narrow political matter: As I’ve pointed out in Tiverton and for the state as a whole, our public schools have generally lost about two full grade-levels worth of students in the last decade.  Picture no fourth and no fifth grade students in the entire state; that’s how much enrollment has decreased.  This leaves a bureaucratic, unionized, and expensive education establishment demanding increased budgets to educate fewer children, which its partisans do against a taxpaying public that has less and less actual use of the schools.  That battle alone will be huge in Rhode Island.

But even an issue of that magnitude is as nothing to the reorientation of a society with fewer children.  The way people think and interact with the world will change on that basis.  Indeed, not having children (or not having multiple children) takes pressure off of people to become full adults, making them more susceptible to the pitch of the “government plantation” advocates to look to central planners as parents to us all.  It also makes us vulnerable to people from other cultures in which Peter Pan has been held at bay.

justin-katz-avatar-smiling

Talking Yourself into Too Much Debt for Baseball

Obviously, there are some differences between a city-funded facility for a double-A minor league baseball team and a state-funded stadium for a triple-A team, but Joseph De Avila’s Wall Street Journal article on the Hartford Yard Goats caught my attention yesterday because it illustrates some of the perils:

Hartford, a city of about 124,000 residents that is facing a fiscal crisis and a high poverty rate, is on the hook for $68.6 million in bonds issued to cover most of the construction of Dunkin’ Donuts Park.

Mayor Luke Bronin, a Democrat who opposed the stadium but is now reluctantly dealing with it, said the ballpark alone will never generate enough money to pay back the debt. The original idea was that surrounding development will generate funds to pay off the loans and bring in additional tax revenue for the city.

Given the incentives and structure of government, advocates for some big expenditure have a narrow objective to get a project approved.  They just need some authority — whether an elected official or an electorate passing a ballot initiative — to give the go ahead.  Then, decision-making enters a weird realm beyond the reach of the people actually paying the bill, but with a those in charge obligated to continue on the public behalf.

So, we start out with promises and grand visions and wind up scrambling just to make something work without loosing too much money.

Mr. Bronin plans to borrow $20 million in bonds in the coming weeks to cover a shortfall in the city’s budget, and next year the city is already projecting a $65 million deficit.

Despite the challenges, Mr. Bronin said: “There is no question it’s better for the city to have a baseball park than a vacant parking lot.”

Why is there “no question”?  Hartford is now borrowing money for operating expenses.  That’s insane.  Unfortunately, many people have a vision of government in which it is a means of doing things that really make no sense at all.

monique-chartier-avatar

Leader Patricia Morgan Files Bill to Repeal (Clearly Unnecessary) Tolls

On behalf of all Rhode Islanders, thanks to Minority Leader Patricia Morgan for filing a bill to repeal RhodeWorks’ truck (wink) tolls. (See her statement after the jump.)

Governor Gina Raimondo asserted the need for tolls as a financial necessity to repair state bridges which were/are some of the worst in the country but, by golly, we just don’t have the will to find the money in the state budget (even though it’s a MAJOR public safety issue, danger, danger, Will Robinson).

However, the governor has decisively rebutted her own assertions about the fiscal necessity of tolls, as StopTollsRI.com (disclosure: I act as their spokesperson) pointed out in a letter to the Providence Journal on Sunday, by proposing a brand new, $30M/year spending program.

“Free” college tuition is at best nice to have (and it certainly would not solve the state’s employee skills gap, as the governor claims). If there is money in the budget for an expensive nice-to-have item, then it is clear that there is money for a less expensive vital service such as bridge repairs.

Legislators can now vote to repeal tolls, secure in the knowledge that public safety did not necessitate the passage of this highly destructive new revenue stream and confident that the money can be found in the budget to repair the state’s unsafe bridges. The governor has helpfully done this hard work for them.

mike-stenhouse-avatar

“Save RI”: The Antidote To The Progressive Agenda

Rhode Island families understand that our quality of life can only be improved if more and better businesses create more and better jobs! Yet, the progressive-left has a very different vision. They are openly promoting job-killing, anti-business, and anti-family policies. Their so-called “fair shot agenda” would transform our Ocean State into a liberal utopia … where businesses face even higher legal and financial risks, and where worker safety, absenteeism, and workplace productivity are compromised.

The Ocean State faces a stark choice.

ruggeriopawsox-featured

State House Report with John DePetro, No. 4: Flanders in the Outside Lane, Ruggerio on the Inside

For my weekly call-in on John DePetro’s WADK 1540 AM show, the topics were Robert Flanders’s play for the U.S. Senate, Raimondo’s tuition talking point, and Dominick Ruggerio’s insider senate presidency.
Click full post for audio.

I’ll be on again Tuesday, April 11, at 2:00 p.m.

Quantcast