Tax Foundation Runs Some Test Firms Through the RI Ringer

The new study that Tax Foundation Tax Counsel & Director of State Projects Joseph Henchman mentioned at the Rhode Island Public Expenditure Council (RIPEC) Business Climate Conference is now available.  Basically, the study creates 14 hypothetical companies/divisions, one new (to an area) and one established, of each of the following:

  • Corporate Headquarters
  • Research and Development Facility
  • Retail Store
  • Call Center
  • Distribution Center
  • Capital-Intensive Manufacturing Operation
  • Labor-Intensive Manufacturing Business

Overall, Rhode Island ranked 46th for established firms and 44th for new firms on the national field, with the following breakdown:

Corporate Headquarters
Research and Development Facility
Retail Store
Call Center
Distribution Center
Capital-Intensive Manufacturing Operation
Labor-Intensive Manufacturing Business


In the areas in which Rhode Island does a little bit better, it doesn’t do much (if any) better than the two states that surround it.  As advocates for centralized government are always anxious to point out, taxation is only one consideration of debatable importance in business decisions.  But it’s one over which government has direct and immediate control.  The only area in which Rhode Island might stand out to corporate decision-makers is for start-up capital-intensive manufacturers, such as a steel company.

If the state really wishes to emphasize a “knowledge economy” and leverage established firms and institutions of higher education already in the state, one would expect the tax code to reflect that preference.  The R&D and corporate HQ categories ought to be at least middle-of-the-pack for both established and new firms.

Of course, free marketers (like me) will argue that the state shouldn’t try to pick industries in that way.  At the bottom, as we are, we ought to open the floodgates.  If the powers who be think it a good idea to fine tune the inflow of active companies down the road, they will at least have a better sense of the sorts of businesses that private interests are willing to risk their own resources to begin and maintain.

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