There’s Good News and Bad News — Arlene Violet

There’s Good News and Bad News — Arlene Violet

 

The General Assembly has passed a $15.2 billion budget that has mostly bad news but some good news. The good news first: The budget authorizes the creation of a new Office of Inspector General that has the authority to investigate state agencies but not other branches of government. 

 

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As noted by House GOP leader, Michael Chippendale, the budget has grown 200% since 2000 and more than 70% from the $8.9 billion in spending approved in 2016. The democrats in the General Assembly have only learned the skill of addition in grammar school with subtraction, a lost proficiency. The solons seem incapable of ever finding a funding cut anywhere.

 

One of the more controversial provisions of the budget involves the millionaire’s tax, i.e., a 1% surcharge on income over $1 million. Originally, the proposal was to implement a 3% surcharge, which will now be phased in over 3 years. The RI House entertained  a proposal by the progressive wing of the democrat party for the surcharge to be levied  on all income over $640,000 but ditched the idea. Debate on any surcharge focused on the argument as to whether the extra tax would make millionaires flee from the state and take their charitable donations with them. Research seems to establish that a small number of millionaires do relocate for tax reasons but that the vast majority stay, probably because their businesses are in the state and hard to relocate if they are smaller businesses. 

 

Stanford University penned a study that estimated only about 2.2% of millionaires’ interstate moves are motivated by income taxes, and the income received by the state more than offsets that exodus. One potential flaw of these studies is that they don’t combine all the taxes in a given jurisdiction, primarily when combined with the estate taxes. The House Speaker, Christopher Blazejewski, took a cautious approach by implementing the surcharge over 3 years so it can be monitored here.  

 

In my experience, rich taxpayers have fled Rhode Island because of the estate tax bite, particularly before it was yearly adjusted with some predictability of the tax rate. Of course, the overall tax structure does impact big business. I wonder if the Governor or legislative leaders sat down for a heart-to-heart talk with the management of Hasbro as to why it is departing from the state.

 

In nearby Massachusetts, groups such as the Mass Opportunity Alliance have challenged the reports done by the Massachusetts Budget and Policy Center, saying the latter has used outdated data on migration vs current data, and it makes the case that net migration losses have resulted in $13.21 billion in adjusted gross income fleeing the state.

 

Nonetheless, putting aside the arguments and mind-crushing numbers, the fact remains that Rhode Island is perceived as a high-tax state.  It would be naïve to discount that perception.  Hopefully, the legislature, through its Office of Auditor General, will be monitoring the result of the flight caused by the millionaire’s tax.

 

The fundamental issue here, however, is the growth of government while the population remains relatively stable. There is absolutely no reason why the Auditor General should not be charged with reviewing each outlay by the General Assembly for duplication and redundancy. The slush fund for special donations by favored legislators in their hometown should stop. Salaries, particularly for some administrators and some part-time legislative employees, are ridiculous, with the usual shibboleth that these exorbitant salaries are necessary to compete with other states.

 

When a Rhode Island taxpayer experiences what he/she has to pour out monetarily for state government, for property taxes with burgeoning local taxes, and the cost of living,  it is almost overwhelming for most people. Yes, the policies of the Trump administration are draconian, but that should be the motivation to help those who are picking up the tab to have some relief. Sadly, the state budget is short on that kind of relief.