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CVS Threatens Job Loss Because Of Chafee Tax Credit Cuts

Tuesday, March 26, 2013

 

Will the reduction in a tax credit push CVS out of Rhode Island?

Governor Lincoln Chafee's proposed reduction in corporate taxes may have inspired cuts at one of the state's largest employers--CVS Caremark.

The Woonsocket-based pharmacy company began reducing its work force less than a week after Legislative Lobbyist, Robert Goldberg expressed concerns on March 6 before the RI House Finance Committee about the Governor's Fiscal Year 2014 budget proposal article relating to corporate tax reductions.

"Any reduction made to the tax credits ... will result in a serious examination of both our current concentration of jobs here as well as an evaluation of any future job growth in the state," Goldberg testified about a trade-off provision in Chafee's budget to offset loss of revenue from progressive reductions with overall corporate taxes with a parallel reduction in tax credits.

Goldberg appears to have predicted the future. It is unclear how many workers have been cut from the company so far, however, sources indicate CVS has given a two-week layoff to the picker/packer employees in its warehouses and fired or laid off managers, directors, designers and other personnel throughout the company. While there is no direct evidence tying the elimination of employees to the Governor's proposal, the timing begs examination.

Swapping tax credits for tax cuts

Article 9 of the Governor's FY 14 budget entitled Relating to Taxation moves to reduce corporate taxes in a progressive manner over three years from the current 9% to 7%. The reduction aims to make Rhode Island more competitive, particularly in the Northeast, for state business. Rhode Island's corporate tax rate currently ranks high nationwide as far as corporate tax rates and its geographic location makes it hard to compete for business among its close, New England neighbors.

Would the corporation consider a move out of Woonsocket and into Massachusetts?

Chafee's proposed reduction would drop RI's rate to somewhere in the middle on a national level and be one of the lower corporate tax rates in the northeast. Testimony on the proposal was overwhelmingly positive as a long term measure, in spite of the short term loss in revenue the change would create.

The Governor's bargain to offset the upfront tax loss of approximately $90 million over five years was a reduction of the Jobs Development Tax Credit. According to the Fiscal Year 2012 Tax Incentive Report Disclosure, of the 8 entities that received total tax credits valued at $16.4 million, $15.4 million went to CVS. ($96,600 went to 2 financial institutions and the remainder went to 5 other corporations). The new plan proposes an elimination of 25% of the credit from January 1, 2014 to January 1, 2015. Then the plan eliminates 50% of the credit beginning 2015 and after.

CVS Caremark is at the top of the corporate list for receiving incentives from the state, according to a December 2012 study by the New York Times, second only to the bankrupt 38 Studios for dollar amount in incentives. 

A fair reduction?

The Governor's Director of Communications, Christine Hunsinger said that the Governor believes in lowering the corporate tax rates fairly. She stressed the Governor's commitment to responsible government as paying for the reduction by finding the revenue elsewhere, and that the Governor stresses his conviction that businesses want “predictability and stability” within the state business climate.

What are the stakes in terms of CVS and its impact on the Rhode Island economy? “We are proud to be a major contributor to Rhode Island’s economy and one of the state’s largest employers," said Michael J. DeAngelis, Public Relations Director for CVS. DeAngelis pointed to an economic impact study that found that the company’s Rhode Island operations contribute more than $1.2 billion to the state’s GDP annually through 12,000 jobs (6,000 employed directly by CVS), $831 million in labor income, and $116 million in state and local taxes. "The study also found that over the next ten years, CVS Caremark's contribution to Rhode Island's GDP is projected to be between approximately $16.6 billion to $35 billion,” DeAngelis said.

In spite of the lingering effects of the recession, CVS managed record profits last year. Net profits for 2012 increased 15%, totaling $123.1 billion. In the fourth quarter of 2012, CVS earned net revenues of $31.4 billion. So why is the corporation so concerned with maintaining the Jobs Development Act tax credit of $15.4 million? And, to its benefit as much as any other corporation's, the corporate tax rate for the entire state is being reduced?

DeAngelis, on behalf of CVS Caremark chose not to comment on this directly. Rather, he reiterated the same statement Lobbyist Robert Goldberg had given before the House Finance Committee about any reduction made to the tax credits resulting in a serious examination of both their current concentration of jobs here as well as an evaluation of any future job growth in the state.

Hunsinger, when asked what the position of the Governor's office was to what could be considered a threat by CVS to leave the state if they lose any or all of their tax credit, answered, “The Governor does not want CVS to leave.” But, regardless of Governor Chafee's desire to keep the economic monolith within Rhode Island, the company has made itself heard with words and, now, with a series of job cuts.

It is uncertain whether the company will continue to reduce, streamline or otherwise modify its Rhode Island work force. But, following the recent statewide job losses with big corporations like Hasbro, and Met-Life coupled with sequestration work force reductions to federally contracted area companies such as Raytheon and Electric Boat, the loss of CVS jobs could send the state's ill economy back to intensive care.  

 

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Comments:

pearl fanch

Raising taxes on citizens and cutting taxes on businesses. Can this "governor" be any more backwards??????

He's a (*&&(((& disgrace!!

anthony sionni

I am not sure on this one, maybe someone who is more knowledgeable can chime in? I did hear Gary Sasse on the radio one day saying on how he was in favor of getting rid of tax incentives, said they dont work and corporations just keep moving to go where the better deal is, if I remember correctly.

I also remember him saying ,CVS as other corporations here, already pay a lower than 9 percent corporate tax rate. I think lowering the rate is good, but to slow, over 3 years? It should just be eliminated all together, however to do that you have to make up for the revenue, I suggest cut spending! Also more needs to be done for smaller businesses, that dont pay the corporate tax rate. Get rid of the yearly $500 filing fee and Inventory tax, for starters!

"In spite of the lingering effects of the recession, CVS managed record profits last year. Net profits for 2012 increased 15%, totaling $123.1 billion. In the fourth quarter of 2012, CVS earned net revenues of $31.4 billion"

I am all for keeping jobs here, but is CVS just being greedy?

JOJO MONKEY

The money they will get from CVS will only be wasted on failed programs that are already killing this state. leave CVS alone! they are a good business and charitable partner.

dis gusted

CVS is greedy. They are not a good business and their charity contributions are tax write offs for the rich. They treat their workers like crap. I avoid going to their self serving high profiting stores. Their prices are higher than other competitive pharmacies and they throw crumbs to the poeple with their stupid coupons and percentages off. Even the coupon they throw at you online is a 2 day coupon..not even long lasting!

jon paycheck

the bottom line..

ri needs cvs alot more than cvs needs ri.

beggers cant be choosers and ri is the begger.

David Beagle

I'd look for democrats to squash Chafee's idea. Democrats and CVS have been in bed for a long time.

dis gusted

RI doesn't neeed CVS.

RI needs the self serving Gen ASSembly lawmakers to be replaced with conscientious honest politicians willing to do what it takes to get the economy back on its feet.And to do it with term limits.

RI doesn't need the Gordon Fox's and the Don Carcieri's making deals with idiots like Curt Schilling who had no idea how to run a gaming company (check oout how he spent the money given.to him...very lavish in what he purchased. Gamers will tell you he purchased high-ended equipment for everyone(instead of for the game designers and that was foolish)
RI needs monitoring of where the money goes. "Follow the money" needs to be the mantra or state motto!
RI needs transparency. The GA won;t allow it. Again term limits by referendum is needed-they themselves won;t do it.Fox always puts the term limit bill in study and that means dead on arrival!
RI does not need CVS..
As for beggars being choosy, those are the ones that need replacement

Thomas Kolodziejczak

CVS is being greedy. Record profits last year and now they threaten the state because they want more? Maybe if CVS ran its operation within the parameters of standard business regulations and didn't rack up millions in fines for things such as selling baby formula, milk and eggs past their expiration rate they would be able to live with the corporate tax rate the Governor is proposing. And that in turn could be beneficial to other companies. But...right that is the problem because CVS only cares about CVS!

Robert Anthony

Why not give the small business sector tax credits? After all that is where our growth will come from, not from these huge corporations that'll sell us out for a dime and have the morals of an alley cat. Small businesses are getting taxed out of existance in RI and yet none of our so called elected "leaders" are willing to help. Yet, these are same people who, for most of them, will lie cheat & steal to keep their fat a$$e$ in the GA.

edith pilkingoton

The offer that cannot be refused . . .

How did we get here? Remember all those mom and pop drugstores that CVS gobbled up on there way to becoming the 21st century example of the Standard Oil Trust?

Where's Upton Sinclair and Teddy Roosevelt when you need them?

edith pilkingoton

"their way" . . . I know . . . I know

"their way" or the highway . . .

Caroline Evans

The sheer unpredictability of the RI business climate is disincentive enough to any savvy business with options to locate where they choose.

You cannot even count on a sensible form of corruption here as self-defeating, incompetently executed corrupt acts are as likely as not.

You never know which competitor might get some free ride of massive proportions paid for with you company's tax dollars. Witness the Studio 38 fiasco.

For example, would any software company ever truly want to locate in RI if it is even possible that some vast and crazy subsidy might be offered for no rational reason?

So too with any other incentive program... even if your company stood to gain in the short term from it... you can have faith that the RI "political elite" will find some way to render it useless to you.

If you get $100,000 credit of some sort... you may rest assured you will be expected to pay $200,000 for the privilege one way or another.. over the table or under.

The get-rich-quick by way of 'earth-shakingly brilliant' scheming mentality is endemic in RI culture.

If you are 'given' anything, rest assured you will pay for it, somehow, someway, someday.

Caroline Evans

CVS has a corporate presence elsewhere in New England... and in a state a good deal more business friendly than RI.

In this 'other state' even the most 'commie-like' of the local political spectrum are more business savvy than are even the most pro-business RI politicos.

Any state with access to the Interstate Highway system and the internet can host CVS... they are a retailer and customer service operation... and have few difficult requirements to fill.

Brenda Greene

Caroline's comments are spot-on.

Mark St. Pierre

CVS is a corrupt company thatb thinks they should get special privileges in RI. They represent what ails America today...corrupt, corporate greed !

pearl fanch

RI is starving for jobs. We are in no position to chase away CVS or any other large employer, regardless of how much or little money they are making. They're in business to MAKE money....no other reason.

If RI had a plan (lolololololololololol) to replace CVS with another corporation, then fine. Let them go. You know that isn't the case, so yes......RI NEEDS CVS.

Kati Loreen

Before they leave, let's give them a tax bill that covers all their holdings nationally.

Michael Trenn

One can look at all of these comments and tell almost immediately who the Progs are. Their ignorance is breathtaking. The way I see it, Chafee simply wants to put money in one corporate pocket, while taking it out of the other corporate pocket. This is his "big idea" to make RI more business friendly. No mention of regulatory reform, no program to promote ethics among politicians; nothing but a big switcherooo.

Odd Job

LOL at RI telling any company to stick it. Remember the ugly girl at the dance who's happy if anyone with a pulse will pick her.

Charles Marsh

In my opinion, CVS is laying-off people because “middle-class” customers, CVS’s target market, can no longer afford “middle-class” goods. The middle-class is slowly joining “the poor” due to the rise in gasoline and heating oil costs. If the “middle-class” wants to prosper again, they must demand “cheap and clean” energy. CVS is doing what all efficient companies do to make ensure a profit: layoff people. It’s not personal, just business.

Kati Loreen

Charles: turn the TV off.




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