By,

Ed Cooney
Laurie White

 
“Americans know how to use the moving van to escape high taxes.” And no more so than in Rhode Island.  Even the most casual observer can readily see that taxes here are surging and people are bolting. The two go hand-in-hand, and they are a toxic combination.

 

The editorial pages of the Providence Journal have been abundantly clear in describing how Rhode Island’s punishing tax load is depressing job growth and family income. In their May 17 editorial, “A growing deficit,” the writers are precise in pointing out that Rhode Island is suffering even more than most states because it has failed to foster private-sector job creation. 

 

What was especially interesting to us were some of the blog entries in response to that editorial. One blogger on projo.com lamented that “private-sector jobs and a stronger economy are the only answer. Without a strong private sector there is NO public sector.” 

 

Exactly.

 

And we would add that without a strong private sector, there is no social service safety net either.
 
A more global point of view on the subject of job growth was expressed on the opinion pages of the Wall Street Journal (May 18, “Americans know how to use the moving van to escape high taxes ) The contributors note that the sock it to ‘em mentality backfires in the long run “because people, investment capital and businesses are mobile. They can leave tax-unfriendly states and move to tax-friendly states. And the evidence shows that Americans are more sensitive to high taxes than ever before.” 

Indeed.

 

Notwithstanding the fact that some Rhode Islanders are currently “frozen in place” because of upside down mortgages, over a two year period (2005-2006) Rhode Island lost, on a net basis, 8,296 taxpayers with an aggregate adjusted gross income totaling $485 million. (Source: IRS Migration Data)  Not only that, but the U.S. Census Bureau has just reported that over a longer period of time, from 2003 through 2008, Rhode Island’s resident population took a big hit. The State lost an estimated 20,614 people. (Source: Population Division, March 2009) To put those numbers in context, imagine virtually the entire town of Bristol as a ghost town. Empty. That’s a lot of lost potential.

 

But some positive developments are in play. In 2006 the General Assembly enacted a Chamber supported reform of the Rhode Island personal income tax which many consider to be the most important pro-business, pro-jobs tax reform passed by the Assembly in the last two decades.  Although commonly referred to as the “flat tax,” the legislation, in fact, created a regional tax option; that is, an optional personal income tax computation designed to bring Rhode Island’s income tax structure into line with those of Massachusetts and Connecticut. Most significantly, the legislation phased down the Rhode Island income tax rate from its current level of 9.9%, the second highest in the nation, to 5.5% over a six year period.  Like MA and CT, however, a taxpayer utilizing this option will forego most credits and deductions currently permitted under the Rhode Island tax code.  The enactment of this reform by an Assembly controlled by Democrats and signed by the Governor was hailed in many national and regional publications – including the Wall Street Journal and Fortune magazine.  When fully implemented in 2011 Rhode Island will no longer be at a competitive disadvantage with MA and CT as taxpayers will have the option to compute their income taxes in the same manner as MA and CT.

 

While the news is mostly good on this front, it is important to alert Rhode Islanders that efforts are underway in some pockets of the Rhode Island General Assembly to undue this historic reform.  Five bills are presently pending in the Assembly which would either freeze the flat tax at its current rate (H 5282 and H 5624) or repeal it altogether (S 115, H 5469 and H 6163).  The General Assembly must resist the temptation to repeal or freeze this regional tax option.

Everyday Rhode Islanders know that private sector job growth is the only real solution. They are writing about it on the mainstream blogs, talking about it on the radio and comparing notes on the ball field.  The chatter is incessant and the message is consistent. We need more taxpayers, not more taxes.

 

--Ed Cooney is chairman of the board of the Greater Providence Chamber of Commerce. Laurie White is president.