Pam Gencarella: The Twilight Zone

Thursday, July 09, 2015

Pam Gencarella, GoLocalProv MINDSETTER™

Lincoln Chafee

Between The Pit Of Man’s Fears And The Summit of His Knowledge - The Signpost Up Ahead, The Twilight Zone.

Former Governor Chafee said we were all too negative. But perhaps it is just that Rhode Islanders fear success. The General Assembly leadership boasted that 2015 was a good session. If we ignore the implosion of fire districts around our state, if we ignore the number of cities on the verge of bankruptcy, if we ignore the runaway Medicaid costs, and if we ignore the bridges crumbling under the weight of our vehicles and roads with potholes that swallow a small vehicle, if we ignore the debt and pension obligations that rival Greece, if we ignore the future downward pressure on tax revenue from Massachusetts gaming and we ignore the failing education system then perhaps we could see the positives in RI and in the 2015 General Assembly session. But wouldn’t we be living in the Twilight zone then?

It was almost like being in the Twilight Zone on budget night in the House Chamber when Chairwoman Serpa (D-West Warwick) stood on the floor to recount a conversation she had with a constituent.

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In discussing her support for the elimination of the sales tax on energy for non-manufacturing businesses, Rep. Serpa spoke of a West Warwick restauranteur who asked if the General Assembly was really going to eliminate that tax. He said that he would realize $3,600 in tax savings as a result of this tax cut found in the 2016 budget (Article 11). He explained that he would use that money to purchase another truck, which would mean more business, which would mean hiring new employees, and Rep. Serpa stated, in the end that would mean more tax revenue for the state. Bingo! It seems we have heard that theory before - meaningful tax cuts lead to more private job creation. But where have we heard that?

While the 2016 budget provided for this tax cut, along with a $50 break from the minimum corporate business tax, it did little else to allow the free market - private industry - to create new jobs. It provided giveaways to corporations and students in an effort to bribe them to stay in the state, but what happens when the bribes run out. The students and businesses are still left with the high cost of doing business and the high cost of living in RI as are the already established businesses. Really what the budget did was maintain the status quo in government spending and in fraud, waste and abuse in our government systems, add more debt, including more pension debt, and increase other taxes and fees. And with the possibility of a fall session there comes the possibility of more giveaways for the Pawtucket Red Sox Stadium and more debt and taxes with the truck tolls.

Yet the General Assembly unanimously passed a budget that addressed none of the issues underlying the problems in RI as evidenced by the $1 billion in projected deficits over the next 4 years.

What would happen if, from now on, every new piece of legislation and every budget was based on Rep. Serpa’s theory that cutting taxes means more new private employment and ultimately, leads to increased tax revenue? What if, instead of spending $5 million on branding RI, we focused all legislative attention on developing a 5 year budget that not only eliminated the $1 billion in projected deficits, but also put us on a path to reducing taxes, both at the state and local level. And, to top it off, what if we mimicked what Massachusetts set in motion 20 years ago to reform the education system. We might have a winner on our hands.

Let’s Shoot for Mediocre - Middle of the Pack.

The Tax Foundation ranks RI 45th in this year’s state business tax climate, which looks at all taxes combined - state and local. Massachusetts ranks 24th, right in the middle of the pack. If RI’s goal were to just be mediocre and target a ranking of 25, we would be competitive with Massachusetts and move up 20 spots. So perhaps our elected leaders will heed Chairwoman Serpa’s words of wisdom - lower the taxes and create new jobs. We know what needs to be done - attack fraud, waste and abuse in our government systems, including Medicaid and other welfare programs, reduce the size of state government, starting with the state insurance exchange; bring public employee pay and benefits in line with private industry; overhaul the DOT to address the mess in which the new Governor found it; revamp the delivery of fire service enlisting the help of North Providence Mayor Lombardi and utilizing WatchdogRI’s fire report, and implement E- Verify to stop the influx of illegal immigrants.

The 2015 legislative session came to an abrupt ending, which many think was a perfect ending. However, the House says it will come back in the fall, although the Senate says it won’t. But we all know that things can change very quickly and so, anticipating that the entire General Assembly returns in the fall, their primary purpose will be to look at the latest Pawtucket Red Sox proposal and the truck toll proposal. Neither of these issues will address what lurks beneath RI’s $1 billion in projected deficits. Neither of these issues will lay the foundation for an improved business climate. Both proposals will only either add more debt for Rhode Islanders or add more taxes to residents and businesses.

Until RI’s elected leaders look to reducing taxes rather than looking for new revenue streams, companies like the celebrated start-up, Teespring, will conclude that RI is not the place to be. It’s that simple. Ask Chairwoman Serpa.

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Pam Gencarella is a member of OSTPA, a taxpayer advocacy organization in Rhode Island.

Related Slideshow: The Highest Taxed Communities for 2015

How do the taxes in your community compare to other cities and towns in Rhode Island?

GoLocalProv has ranked communities from the least to the highest taxed on the basis of their tax rates, using newly released data from the state Division of Municipal Finance. The below slides list the tax rate per $1,000 in value for homes, commercial property, personal property, and motor vehicles for the 2015 fiscal year, which began last July and ends next June.

Along with the rates are examples of what taxes might cost a typical resident in each city or town. For residential taxes, this calculation is based on the current statewide median price for a single family home, which is $215,000. For communities with them, homestead exemptions are factored in using the latest available figures. For motor vehicles, the example used is a 2008 Honda Accord, valued at the maximum retail price of $15,150. The total cost of home and car taxes is then represented as a percentage of the median income for that community, offering a rough measure of how affordable taxes are for those residents as compared with the taxes in another city or town.

Data sources: the Rhode Island Division of Municipal Finance, the Rhode Island Association of Realtors, the Rhode Island League of Cities and Towns, the National Automobile Dealers Association, and the U.S. Census Bureau.

Pam Gencarella: The Twilight Zone

Related Slideshow: The Highest Taxed Communities for 2015

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