Moore: Elorza Should Propose a Municipal Income Tax

Monday, December 19, 2016

Russell Moore GoLocalProv MINDSETTER™

 

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How much longer can Providence continue kicking the proverbial can down the road?

It’s time for Mayor Jorge Elorza to take bold action. He should take action that satisfies his progressive supporters from the city’s east side that catapulted him into office by voting in droves for him. Elorza should create a new, progressive tax, of which they’ll be paying the lion-share.

Namely, a progressive, municipal income tax that will affect the city's highest earners and leave the lower-income residents held harmless. It’s progressive. And it’s also fair.

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Unfunded Liabilities

The unfunded liabilities aren’t going anywhere. And there hasn’t been any real attempt to stymie them.

Sure, Fitch, one of the so-called major rating agencies, recently gave the city a bit of good news by improving the city’s rating a notch after the city announced that it posted a surplus over the most recent fiscal year.

However, Fitch still pointed out that the city’s spending is expected to exceed its revenue growth over the next several years. That’s not good news.

The cold hard fact surrounding Providence is the fact that it’s got a serious unfunded liability problem. The city has unfunded pension liabilities that are more than $900 million. It also has an unfunded health care liability that’s a similar amount.

Just Getting By

Nobody really knows how much longer the city can continue passing what I call “get me by” budgets. It could go on for years.

But here’s the problem: it precludes the city from moving forward.

For instance, city officials are currently going to the mat with state leaders over the expansion of the Achievement First Charter schools, and Elorza is sitting coyly in the middle of the debate. The expansion of the schools would cost the traditional schools millions of dollars, so there is a very real likelihood that the expansion will not take place--despite the support of the state education commissioner.

That’s just a microcosm of Providence’s problems moving forward--without a true structural reform in the city. The city won’t be able to invest in education, infrastructure, or anything else that would improve the capital if it doesn’t solve its liabilities.

A Question of Will

But let’s face it: Providence politicians haven’t shown a real stomach for addressing that issue. Nobody wants to redo the battle and reignite the animosity we saw on the statewide level when Gina Raimondo’s pension reform plan shaved billions off of the state’s unfunded liabilities. It’s not easy to ask people to give back that which they’ve already collectively bargained for, fair and square.

Bankruptcy is another way to solve the problem. But Elorza has consistently shrugged off the option. And he’s hardly alone. Most politicians don’t seem too interested in giving up their power. That’s what would happen if the city were to throw itself at the mercy of a receiver and a bankruptcy judge.

Enter the municipal income tax, as first recommended by GoLocalProv MINDSETTER™ Michael Riley.

Since the voters of the City of Providence who normally supply the margin of victory are from the wealthier, East Side of the city, they’re largely responsible for the irresponsible budget practices that have taken place over the last few decades. That’s democracy.

Take Responsibility

Therefore, it seems fair that the wealthier folks, who vote in greater numbers and end up on the winning side of the mayoral elections, should bear the brunt of the cost of the city’s financial mismanagement over the years.

A wealth tax, which would basically be an income tax on individuals who earn an income over a certain threshold, could be used to fund the city’s unfunded liabilities. That would alleviate the budgetary pressures over the short and longer term.

Professional actuaries could figure out what amount needs to be garnered from the tax, but I imagine the rate would only be levied on Providence residents who earn more than $100,000 individually and probably double for married folks.

There’s Precedent

The concept is not unheard of. New York City has had a municipal income tax for years and it has provided that metropolis with some level of financial stability.

It’s also a very progressive idea that state representatives who go by the label should be able to get behind. They know who they are. (But don’t be surprised when these so-called idealists refuse to get behind this idea.)

Far be it from me to propose new taxes. I think a new municipal income tax will certainly discourage people from moving into Providence. But the people of Providence have made their decisions and left themselves no other alternatives that are more attractive than the so-called wealth tax.

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Russell J. Moore has worked on both sides of the desk in Rhode Island media, both for newspapers and on political campaigns. Send him email at [email protected]. Follow him on twitter @russmoore713.

 

Related Slideshow: 10 Things to Know about Elorza’s Fiscal Year 2017 Budget Proposal

Providence Mayor Jorge Elorza introduced his Fiscal Year 2017 budget proposal for the city -- here are 10 things you should know. 

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Car Tax Exemption

Elorza's FY17 budget raises the car tax exemption from $1000 to $2000.  

The exemption had once been as high as $6,000 in the City of Providence, which has the highest car tax rate in the state.  

Elorza had pledged during his campaign to raise the examption up from $1000 -- which will have budgetary implications, but had been an issue of importance to Elorza due to its impace on lower-income residents. 

 

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