The Economic Death and Dismemberment Act

If the "Economic Growth and Fairness Act" proposed yesterday by RI Representative Arthur Handy (D, Cranston) and Senator Paul Moura (D, East Providence) becomes law, it will blow away any lingering wisps of hope that our state can pull out of its current crisis without utter collapse. Based on a report (PDF) issued by The Campaign for Rhode Island's Priorities — a frighteningly truthfully name, that — the legislation is essentially a plan for the unions and the poverty pimps to advance their causes during these hard times by further soaking everybody else, plying, most of all, the sensibilities of their liberal allies based on the premise that heavily progressive taxation is a moral imperative.

Here's where the foreboding music starts playing in the background as one reads the report:

... we must re-invest in state aid to education and move towards implementation of a predictable and fair formula for state aid to education so cities and towns will be relieved of the struggle to provide quality education on decreasing budgets.

Finally, we must address policy changes that will responsibly reduce state spending while also ensuring high quality services. The Campaign for Rhode Island’s Priorities supports the following measures.

• Implementation of the Long-term Care Act. Currently, elderly and adults with disabilities represent 25% of the state’s Medicaid caseload but account for 66% of Medicaid spending, much of it on expensive long-term institutional care. By shifting spending to quality community care alternatives, an option our elderly and disabled overwhelmingly prefer, we would save significant Medicaid dollars in a way that Rhode Islanders want.

• Implementation of Coordinated Health Planning to stem the rising cost of health care. A state health plan means a comprehensive approach to structural investments and service coordination, helping to make the overall health care system more affordable.

• Investment in reliable jobs by ending private contractor waste.

• Investment in prevention of crime, drug addiction, alcoholism and domestic violence to reduce the state’s prison population and budget. And, elimination of drug-related minimum sentencing requirements to reduce the number of Rhode Islanders sentenced to the ACI.

• Investment in appropriate foster parent recruitment and support to reduce high cost institutional placement of youth in DCYF care.

• Improvements in energy efficiency at state buildings to save on energy costs.

• Reinvestment in the state’s RIte Care, Child Care, and other work support programs to ensure every Rhode Islander has the opportunity to work, learn and stay well.

Even writing off, as typos, such conspicuous errors as forgetting to add non-home property taxes to the property tax total for every group except the bottom quintile (when, as a percentage of income, the top 1% of earners pay seven times more than the lowest 20%), one has to admire the chutzpa of the groups that have endorsed The Campaign.

The hook to silence the anxious majority is a "property tax rebate capped at $600," which enables the group's claim that the act will "reduce the taxes paid by nearly 90% of Rhode Islanders." Any citizens finding themselves attracted to the promise ought to consider the group's own example of how the numbers work out. According to the report, the following are the taxes currently paid by "a Cranston resident, married filing a joint return with a household income at the state’s mean of $51,498":

Income Tax	$1,200
Property Tax	$3,988
Sales Tax	$1,175
Total Taxes	$6,363

Here are the taxes for the same family under the "Economic Growth and Fairness Act":

Income Tax	$1,320
Property Tax	$3,988
Sales Tax	$1,234
Total Taxes	$6,542
Sub Total	$6,542
15% Rebate from RI	-$598
Total Tax	$5,944
Total Tax Savings	$419

Notice something? Even by these undoubtedly sunny numbers, the pre-rebate tax bill is actually higher for this "average family" under the proposed regime. Note, especially, that the property tax isn't actually reduced. Were a town to raise property taxes as much as the Tiverton town administrator has suggested for his town (around 12.2%), most families would see that "rebate" disappear. Perhaps more importantly, we mustn't forget that the process will be for the state to collect more in income and other taxes and then to send checks out to taxpayers as a titular rebate. Should revenue continue to decline and costs continue to increase, it would be a simple matter for the rebate checks to suddenly be deemed "unaffordable."

One reason that revenue might decline isn't given so much as lip service in the report: Those wealthy folks whom The Campaign proposes to tax in a variety of ways (including a 9% increase in income taxes) will have even more incentive to leave the state and/or not to invest in capital-related projects. Now, factor in the following, from the General Assembly's press release linked above:

Additionally, the plan would impose a 2-percent gross receipts tax on accounting and legal services, the largest part of which are business-to-business transactions. Legal services for Family Court proceedings would be exempt.

It's encouraging that the spokesman for House Majority Leader Gordon Fox (D, Providence) says that "right now, [Fox] does not support raising any taxes." It's worrisome that the spokesman for Senate President Joseph Montalbano (D, North Providence) doesn't think "anything's off the table at this point."

It's far too easy see some variation of this legislation's being enacted, and to predict the consequences.