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4 Things RI’s Government Can Do to Improve the Economy, But Won’t

Saturday, March 08, 2014

 

Barry Hinckley

There are four things the Rhode Island legislature could do to move our state from the bottom five to the top five in economic rankings, but won’t:

  • Eliminate the personal income tax
  • School choice / Vouchers / Right to Work
  • Delaware style corporate reform, including tort reform.
  • Eliminate the estate tax. Don't simply raise the exemption threshold, We want billionaires dying here!

 

In both business and sport the competition is constantly analyzed, especially if they are beating you. A common refrain from the boardroom to the locker room is:

“What are they doing that we’re not that is leading to their success and dominance over us?”

This isn’t rocket science; in fact it’s conventional wisdom. A team that’s getting beat, like Rhode Island is, should naturally look to the teams that are thrashing them and determine what those teams are doing differently, that is leading to the thrashing.

Fortunately in the League of States where Rhode Island is a chronic last place finisher, it’s easy to determine what the leading states like Texas, Florida and others are doing that we’re not. Unfortunately Rhode Islanders have developed an affinity for politicians, who for one reason or another, ignore conventional wisdom and repeat the failed policies and tactics of a loosing team. On the playing field of business and sport this gets you fired, in Rhode Island, oddly, this gets you re-hired.

Eliminate the income tax

If you want to encourage people to work, so they make money and spend it locally and remain self-reliant (a pre-Obama American virtue) you don’t penalize or tax them for working.

A sales tax is the only true measure of productivity and the fairest way to fund government. Furthermore raising taxes on vises like Alcohol (society’s most destructive drug) and legalizing marijuana would help raise revenue, the rest would be made up in growth (because people would have more money to spend), reforming education and right sizing government. Keep in mind NH has no sales tax, no income tax, is 7 times our size and their roads freeze and are destroyed every winter, yet they operate on about half of our budget. Go figure.

School choice

It’s a proven fact, that parents will move mountains and to mountains to get their kids into a great, free or affordable school.

Unfortunately, Rhode Island schools are nothing to brag about. About 30th nationally in a country that is 28th out of 32 industrialized nations. In other words no one anywhere is studying what we are doing in education. Not surprisingly in the government jobs program that is masquerading as an education system, we are spending at the top as a nation and state on below average schools and our children are paying the price in a competitive global marketplace. My hometown of Newport is spending over $18,000 per pupil--and trust me the private schools on Aquidneck Island are a thriving alternative and unfortunately families that can afford to, are making the sacrifices to prove it…

As a comparison, the government doesn’t make the food in this country, but they do supply vouchers to people who can’t afford food. Sheldon Whitehouse, a big supporter of food stamps, is really, really rich and can afford to send his kids to the best private schools, and he does. However, he is the exception in Rhode Island, not the rule.

Most people have one choice for their kids’ education, a government school, the same school that Sheldon Whitehouse and other progressive leaders in Rhode Island have opted out of for themselves and their children. These progressives are big fans of vouchers to be redeemed for private sector food, yet against school vouchers. In fact they are big supporters of the single choice government monopoly on education for people who can’t afford private school. Why? If Rhode Island became a school choice state, educational opportunities would explode into a true competitive marketplace enabling families and educators a broad selection of places to work and learn. And where there is competition, quality always improves.

Furthermore, tax payers and our struggling towns, would benefit from lower costs derived through competition. And trust me, people would move here to take advantage of our enlightened education system. Rhode Island children from all walks of life would enjoy the same schools that people like Sheldon Whitehouse choose for their children…In fact you’d hear a big sucking sound from states around us, as hard working people, pursuing a better education for their children, flock to Rhode Island to work and live.

Who knows, Langevin may even hold on to his congressional seat for the rest of his life if our population decline turns around and we keep that seat which is now getting sent to a Pro-Growth state in a few years.

Tort reform

When business people drive through Rhode Island, generally on the way to a state where they have jobs, they can’t help but notice the Heavy Hitter and others like him gracing our billboards and airwaves. This sends a clear message to business owners, “that guy must be making a lot of money suing people like me, probably not a good idea to locate my next facility here”…

Common sense tort reform with real consequences for frivolous lawsuits would make Rhode Island a much friendlier place to conduct business. Rhode Islanders can get ahead through job choice rather than falling prey to unscrupulous litigators…and while the legislature is reforming one system ripe with fraud, the workers comp system could use a business friendly overhaul as well…

Finally, wealthy retired people have time and money

Smart policy would be designed to keep them in Rhode Island spending their time, spending their money, here, not in Florida. The income tax already drives the high taxpayers out of state, the exact people the progressives need in order pay for their dependency programs. As one of the few remaining states with an inheritance tax, Rhode Island’s hefty estate tax is the final straw for all those on the fence. In fact I had many lawyers, accountants and financial planners all say same thing to me during the campaign, “it would be malpractice if I didn’t tell my clients to move to Florida to set up their estate”, and of course they do… and in response Rhode Island, has a system that points a gun to the head of our wealthy spenders forcing them to leave the state, for six months, right before the holidays, so they do their shopping and dining in Florida. And to add insult to injury, one of the tests of residency, is where you donate, so of course the Florida charities benefit while the Rhode Island charities suffer…

Duh. Let’s keep them here, spending in our shops and restaurants and donating to Rhode Island charities. Maybe they’d leave for a couple months after the holidays to avoid the worst of the weather, but six months, which includes the shopping and giving season is just plain stupid.

Who wants to bet me these things will never happen in Teresa and Gordon’s Big House on the Hill?

Former U.S. Senate candidate Barry Hinckley is an entrepreneur, most recently founding and building Bullhorn, Inc. into a world leader in staffing and recruiting software. Bullhorn was sold in 2012 to Vista Equity Partners. Barry, a free market libertarian, lives in Newport where he is working on his next business venture.

 

Related Slideshow: The Ten Biggest Issues Facing the RI General Assembly in 2014

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#1

The Budget

The latest report by the House Finance Committee illustrates that Rhode Island will start the next fiscal year, which starts in July 2014, with an estimated deficit of $149 million. The report shows the FY 2014 Budget contains numerous overspending problems—meaning that the General Assembly will have to cut costs somewhere.

So where will the cuts come from? Lawmakers will have to examine the state's costliest programs. According to the Rhode Island Public Expenditure Council, the most expensive government programs in Rhode Island are Elementary and Secondary Education, Public Welfare, Pensions, Higher Education, and Interest on Debt. Click here to view a comprehensive list of the state's costliest government programs.

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#2

Bankrupt Communities

The state may be two years removed from Central Falls filing for bankruptcy, but 2014 could be the year that other financially strapped Rhode Island communities follow suit—most notably Woonsocket and West Warwick.

With bankruptcy on the table in both 2012 and 2013, this year poses more financial uncertainty for the cash-strapped city of Woonsocket. Earlier this year, the city's bond rating was downgraded due to the city's numerous financial issues—including a growing deficit, increasing unfunded pension liability, and a severe cash crunch.

Similarly, the embattled town of West Warwick faces a variety of financial questions in 2014. With its pension fund set to run out by 2017, the town must address its unfunded liabilities this year if it hopes to regain financial stability. That, coupled with an increasing school department deficit, make West Warwick a contender for bankruptcy.

Look for Woonsocket and West Warwick's elected state officials to address their respective cities' financial issues in the upcoming legislative session.

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#3

Sales Tax

With the Special Joint Legislative Commission to Study the Sales Tax Repeal set to report their findings to the General Assembly in February, the possibility of sales tax repeal in Rhode Island could become a reality in 2014.

"Our sales tax is killing small businesses, especially those in border communities," said Rep. Jan P. Malik (D-Dist. 67, Barrington, Warren), the commission's chair. "How can Rhode Island continue to compete at 7 percent, with Massachusetts already lower than us and considering reducing its sales tax even farther? How can Rhode Island restaurants compete at 8 percent? They can’t. We need to find a way to fix this, and a serious discussion of our sales tax is a discussion we need to have, now, before more small stores close their doors."

In addition to Malik, proponents of sales tax elimination include the Rhode Island Center for Freedom and Prosperity and Forbes Magazine.

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#4

EDC Reorganization to Commerce Corporation

On January 1, 2014, the Rhode Island Economic Development Corporation will be replaced with the Rhode Island Commerce Corporation—a move which has the potential to impact to adversely affect recipients of federal funding contracts made possible currently through the EDC.

This could include the state's Broadband Initiative, Brownfields program, and other contracts made through the EDC. As a result, recipients will now be required to re-apply for federal funding as of January 1st.

The massive overhaul of the EDC was prompted by the 38 Studios debacle, which is projected to cost Rhode Island taxpayers $102 million. 38 Studios, the now defunct video game company, filed bankruptcy in May 2012 just months after securing a $75 million loan from the EDC.

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#5

Marijuana Legalization

With the state's marijuana decriminalization law going into effect this past April, Rhode Island may be a candidate for marijuana legalization in 2014.

Legislation to legalize marijuana has been introduced in each of the last three years, but has never been voted on. Earlier this year, Rep. Edith Ajello (D-Dist. 3, Providence), who is chair of the Judiciary Committee, introduced the bill in the House. Roughly half of the Judiciary Committee supports the measure.

The bill also has the support of the Marijuana Policy Project, an organization focusing on drug policy reform, which hopes to legalize marijuana in ten states, including Rhode Island.

Approximately 52 percent of Rhode Island voters support legalizing marijuana for recreational use, according to a Public Policy Polling survey conducted in January.

Marijuana is currently legal in Colorado and Washington.

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#6

Constitutional Convention

Come November 2014, Rhode Island voters will likely be asked whether they wish to convene a constitutional convention, which involves individuals gathering for the purpose of writing a new constitution or revising the existing one.

Every 10 years, Rhode Island voters are asked whether they wish to amend or revise the constitution. Voters rejected this opportunity in 1994 and 2004. Although rare, Rhode Islanders can vote to hold a constitutional convention and in effect, take control over the state government.

If approved, a special election is held to elect 75 delegates, who then convene to propose amendments to the Rhode Island Constitution. These amendments are then voted on in the next general election.

The likelihood of this occurring highly depends on if the General Assembly does its job to ensure residents that the state is heading in the right direction financially and structurally.

Rhode Island’s last constitutional convention took place in 1986. It proposed 14 amendments—eight of which were adopted by voters.

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#7

Education Board Structure

Less than a year after the General Assembly created the 11-member Rhode Island Board of Education to replace the Board of Regents for Elementary and Secondary Education and the Board of Governors for Higher Education, there are multiple questions surrounding the structure of this newly consolidated agency.

Although lawmakers voted to merge the state's two education boards in June, the Board of Education now wants to split its agency to create two separate councils—one with the statutory authority over kindergarten to grade 12 and another governing higher education.

The Board of Education will present its proposal to the General Assembly during its next legislative session and lawmakers will once again determine how the agency should be structured.

The Board of Education currently governs all public education in Rhode Island.

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#8

Sakonnet Bridge Tolls

Rhode Island may have implemented tolls on the Sakonnet River Bridge this past year, but they could be gone by 2014.

On January 15, the East Bay Bridge Commission—which was established to allow lawmakers and officials investigate various funding plans, potentially eliminating the need for tolls on the Sakonnet River Bridge—will report its findings to the General Assembly. The General Assembly is then required to vote on the issue by April 1.

The commission was established in July following the General Assembly's approval of the 10-cent toll.

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#9

Superman Building

Located on Westminster Street in Downtown Providence, the former Bank of America Building (commonly referred to as the Superman Building) may be the tallest building in the state, but as of right now, it's just a vacant piece of property.

The building's current owner, High Rock Westminster LLC, was most recently looking for a total of $75 million to rehabilitate the skyscraper—$39 million of which would come from the state.

With the sting of the 38 Studios deal still fresh in the minds of lawmakers, a $39 million tax credit appears unlikely.

The question of what will become of the Superman Building remains to be seen. 

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#10

Master Lever

Championed by Republican gubernatorial candidate Ken Block (while head of the RI Moderate Party), the movement to eliminate the Master Level, which allows voters to vote for all candidates of one political party with a stroke of the pen, is poised to heat up in 2014.

Despite Block's strong push to repeal the 1939 law, the measure did not get a vote in the General Assembly last session.

In October, Block told GoLocal that he believes that House Speaker Gordon Fox is responsible for the General Assembly not voting on the proposal.

“Despite the support of a majority of 42 state Representatives, thousands of emails from concerned RI voters and unanimous testimony of more than 100 people who came to the State House in person to testify that the Master Lever had to go, the Speaker personally killed the bill in the most unaccountable way possible—he did not allow the House Judiciary Committee to vote on the bill,” Block told GoLocal.

Speaker Fox has stated on multiple occasions that he believes the Master Level is a legitimate tool that many voters use.

 
 

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