Aaron Regunberg: Voodoo Economics is No Good for RI
Friday, April 06, 2012
Rhode Island’s economy is a mess, and we’re not doing the right things to fix it. Let’s take a look at two snapshots.
The first brings us back just about two years ago, when our state’s leadership on Smith Hill united to make permanent Carcieri’s massive 2006 tax cuts for the wealthiest Rhode Islanders that reduced the number of tax brackets from five to three (meaning less progressivity in the system) and lowered the highest marginal rate from 9.9 percent to 5.99 percent.
In other words , they ensured that someone making $1,000,000 per year is taxed at a rate just 1.24 percent higher than a family making $60,000 per year (the middle bracket rate is 4.75 percent) and just 2.24 percent higher than a family making $25,000 per year (the lowest bracket rate is 3.75 percent).
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTSo why did our legislative leaders decide it was a good idea for our state to ask millionaires to pay just a couple points more than working families for whom every dollar really counts? It’s called voodoo economics (according to folks as un-radical as George Herbert Walker Bush), and despite 30 years of its deficit-creating, economy-slashing failure under Reagan and W., in 2010 our Democratic leadership decided it’s exactly what RI needed to get us out of the recession.
Speaker of the House Gordon Fox said of the law, “This significant tax-reform legislation sends a loud and clear message to all other states that Rhode Island is aggressively seeking to attract business, create new job opportunities and ensure that our economy is moving in a positive direction.”
President of the Senate M. Teresa Paiva Weed said, “This major reform of the income tax code removes an impediment to our economic development and job growth efforts.” And current House Finance Chairman Helio Melo said, “Our legislation streamlines the income tax process and will not only help our residents, but will hopefully open many new doors for potential economic growth.” In other words, their justification for this huge giveaway to the rich was a simple promise: it was going to create jobs.
11 Percent Unemployment
Fast forward to the next snapshot.
Just two weeks ago Rhode Island released its latest jobs report, which showed the unemployment rate to have actually inched upwards, from 10.9 percent to an even more horrifying 11 percent. "I think Rhode Island's economy is stuck in a rut," Charles J. Fogarty, the Director of the Rhode Island Department of Labor and Training said following the report."We're spinning our wheels."
Again, to recap: two years ago Gordon Fox, Theresa Paiva Weed, and Helio Melo pushed through massive tax cuts for the wealthiest Rhode Islanders because they were going to create jobs. And here we are in 2012 with—you guessed it—no jobs.
How could this be? Well, the answer is pretty simple. Voodoo economics don’t work. Tax giveaways to the elite don’t cause businesses to sprout up and they don’t result in all those rich people magically creating more jobs. Instead, they lead to two things—first, they allow folks who are in the least need of additional assistance to tuck a little more capital into their bank accounts (which is great for them but doesn’t do much for our economy); and second, they create huge budget deficits that force us to make deep program and service cuts whose human costs are rivaled only by the economic costs they have for our state.
Take last year’s budget, which—among other cuts—eliminated affordable housing programs and gave insufficient funding to higher education. Beyond the morality of these issues, choices like these are damaging to our economy. Just think about it—what makes for a stronger state, one in which folks have stable housing, which studies show make it a hell of a lot easier to get a job and contribute economically through production and consumption, or one with a rising homelessness population (yes, the number of homeless Rhode Islanders has been increasing steadily for the last several years)?What is more likely to result in a better economy with a more well-educated workforce, improving the accessibility of higher education or raising college tuition rates (which are really just hidden tax hikes on the middle class)?
Strangling Our Economy
It’s just common sense. Rhode Island’s tax giveaways to the rich are not helping our economy, they’re strangling it. They’re keeping us from the revenue we need to repair our roads and bridges, which are among the worst in the country (I assume nobody is going to argue that businesses like to see infrastructure in such disrepair when making investment decisions). They’re ensuring the continuation of insufficient state aid to cities and towns, the reduction of which has been one of the major causes of Rhode Island’s municipal fiscal crises (or do folks think all the talk of bankruptcy is making it easier to attract business to our state?).
The truth is, our legislative leaders lied to us. They fed us the exact same crock that George W. Bush utilized in order to give all of his rich pals the Bush tax breaks ten years ago. Needless to say, those cuts did not revitalize the American economy like they were promised to, and we’re deliberately fooling ourselves if we think that Gordon Fox, Theresa Paiva Weed and Helio Melo’s tax giveaways to the wealthy will be any different. We’ve been trying this supply-side experiment now since at least 2006. The proof is in the pudding, and the pudding is our unemployment rate. These policies have lost our state over $120 million in revenue and have shifted tax burdens to the middle class families, who now have to deal with the 4th highest property taxes in the country.
It’s time we stop spinning our wheels. It’s time we move past the failed policies of the past and raise the revenue we need to make smart investments in our economy. It’s time we recognize that asking struggling families earning subsistence wages to pay practically the same rates as millionaires is not only wrong, it’s economically unsound. We’ve fallen for this plutocratic voodoo enough times already—let’s not get fooled again.
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