Alves in His Own Words

Perhaps the most ear-catching thing that Senate Finance Committee Chairman Stephen Alves (D, West Warwick) said to Dan Yorke yesterday afternoon was that we, the taxpayers of Rhode Island, "don't pay [legislators] enough money to sit there and spend all hours of the night up there" — as if being a state legislator is a bit like being a part-time contractor.

There's something more subtle that ought to be considered, in Alves's performance, both on Dan's show and in a Steve Peoples piece in the Wednesday Providence Journal. Peoples's article emphasizes legislation that Alves is purportedly drafting "to adopt sweeping pension changes that would establish minimum retirement ages, limit annual increases and reduce disability pensions for thousands of local firefighters, police officers and municipal workers," but consider the following clips from the radio:

Yorke: Do you understand how frustrated people are that Steve Alves didn't call to clarify a few things to save millions and millions of dollars in expenses? Do you understand how frustrated people get when they hear the ideas to help us out of our fiscal morass end up being increased fees and taxes an d not expenditure reductions?

Alves: Expenditure reductions, I mean, we are doing many expenditure reductions. ... When you see the supplemental coming out, cutting off the number of families in our state healthcare program. ...

Alves: Part of [the governor's supplemental] was predicated on getting some union concessions, of which we have been waiting for. That's something beyond our purview, and that's something that the governor and the unions, and to this day we still haven't received a plan. ... [also mentions tax credit reductions] ...

Yorke: We can no longer afford the incredible benefit programs that public employee unions have in this state. That's the break of the back.

Alves: Don't forget, two years ago, we changed the pension system for every state employee.

Yorke: A minor adjustment.

Alves: It isn't minor. It saved the state tens of millions of dollars.

Yorke: A minor adjustment to the individual. It was a minor adjustment.

Alves: Dan, I think if you turned around and looked at it, it wasn't a minor adjustment. I mean, you went from people who thought that they could retire at one point at fifty years old to fifty-nine years old. I mean, we're talking about an extra ten years of working whether you have thirty years in. I mean, we did away that. We have lowered the maximum amount that they can receive in their pensions. So we have done tough decisions with them.

So readers of the state's major newspaper receive an image, with the clouds in their coffee, of the hard-nosed Senate Finance Committee chairman standing firm in the tough fight against unionized public sector employees, but during his afternoon chat on the radio, the very same senator neglects to cite his valiant effort — even while under fire for only talking about revenue increases.

On the other hand, his on-air clarification of the corporate income tax was very detailed. Currently, corporations in Rhode Island pay at least $500, or 9% of their net income above that, which (as Monique pointed out last night) puts the net income threshold for taxes above the minimum at $5,555. According to Alves, this leaves 94% of Rhode Island corporations paying the minimum. Now, with the unexplained shift to gross receipts, Alves observes the following (to Dan):

• 358 corporations with more than $10 million in gross receipts currently pay minimum.
• 426 corporations with $5–10 million in gross receipts currently pay minimum.
• 818 corporations with $2.5–5 million in gross receipts currently pay minimum.

So how do all these businesses manage to net less than $5,555 despite millions of dollars of gross receipts? Alves's explanation of the iniquity is "offshore accounts to divert their income." The greedy corporate types have methods for hiding their income that the average Joe lacks. Before we get to the anti-business rhetoric, though, I'd suggest that at least two categories of businesses should be removed from the list of villains: companies that gross millions but use most of that dough to pay for expenses and compensate employees and S-Corps that pass most of their earnings on to stakeholders who pay taxes on it as income.

Surely such innocent and upstanding parties will be among those asked to pay the additional $10.2 million in taxes that Alves proposes to collect in general revenue (with the RI politician's promise that it will be sent to cities and towns), according to the following scheme:

Gross Receipts	New Tax Payment	Net Revenue to Pay the Equivalent Currently
Under $250,000	$500	Under $5,555
$250,000 to $500,0000	$750	$8,333
$500,000 to $1 million	$1,250	$13,889
$1 to $2.5 million	$2,000	$22,222
$2.5 to $5 million	$2,500	$27,778
$5 to $10 million	$3,500	$38,889
Above $10 million	$5,000	$55,556

The third column of back-of-the-envelope calculations is what companies would currently have to net in order to pay the same amount at the current rate of 9%. That's if the state's take remained the same, but as Alves explained, the state's take is going up, which means that the net revenues of companies paying each amount would actually be lower.

Given his attention to detail on the tax-raising count, one can have little doubt that Alves intends to follow through with this one of the two proposals that Steve Peoples describes as having "drawn sharp criticism." Considering that Alves had apparently forgotten the other one before dinnertime yesterday, my hopes for its realization — at least with his tutelage — are not high.