May 21, 2010
Ushering in Further Decline with Cutsie Tax Changes
Legislative leaders are poised to unveil a sweeping plan as soon as next week that would bring fundamental changes to the state's personal income tax system.
This may be one of the few times that I agree with a statement related to taxation coming out of the Poverty Institute, whose fiscal policy analyst, Russell Dannecker, advised legislators to "try to look for the unintended consequences."
With respect to the tax code, the problem begins right at the General Assembly's first statement of objectives. Requiring revenue to remain largely neutral means that necessary tax cuts in some areas have to be made up with tax increases elsewhere. Looking at the 9.9% top tax rate as the main culprit for detrimental perception of our tax climate focuses on a bullet point rather than the comprehensive list of ill-conceived policies.
As came up in recent conversation comparing Massachusetts and Rhode Island, the very progressivity of Rhode Island's tax system is central to its revenue and demographic problems, attracting those with low incomes and repelling those with middle-to-high. I'm not suggesting that Rhode Island should shift its tax burden suddenly onto its poorest residents. What the state government should do is cut taxes at the top and middle brackets and then cut spending as necessary.
I can't be alone in doubting the ability of the people who got us into our current budgetary mess to discern a careful path out of it.
ADDENDUM:
As pointed out by a commenter, I had misread part of the article. (It's been a very, very rough week.) I deleted the section related thereto.
I think you've misread the article. The tax credits for out of state income and for property tax relief are those that are specifically being RETAINED in the bill.
Posted by: David at May 21, 2010 8:59 AMRight you are, David. Slipped through cracks that my horrible week tore open.
Thanks for pointing out the mistake.
Posted by: Justin Katz at May 21, 2010 9:10 AMTHe key is "revenue neutral." They're shifting deck chairs on the RItanic, not addressing the fundamental spending issues that have been building for decades.
So (to paraphrase Dirty Harry) "do you feel lucky punk?" In other words, if you actually work in the private sector, do you feel that somehow the General Assembly isn't coming after your income to maintain its "revenue neutrality?"
How many years of excess taxes are you willing to pay merely to reside in potholed, poorly educated Rhode Island?
And over a working lifetime, what is the opportunity cost for you in decreased job opportunities, and so having to accept what is available for work -- increasingly unavailable in RI -- versus greater opportunity so decreased opportunity for promotions or job-switching / employer-switching and other forms of income increase?
And over a working lifetime, what is the direct opportunity cost of RI's excessive taxes used to support the Democrats' patronage, union and welfare empire? For each thousand dollars a year in excess taxes that you pay in RI (income, sales, property, gas, phone, "gross receipts tax" etc. etc. etc.), what would it be worth at retirement had you been able to invest it and enjoy the benefits of compound interest?
Tens of thousands of dollars? Hundreds of thousands of dollars?
Consider not just the annual cash-flow costs of RI's excessive tax / business-hostile regime, but also the opportunity costs over your lifetime.
Once you do that, "Going Galt" not only seems rational, but failure to do so starts to become irrational!
Posted by: Ragin' Rhode Islander at May 21, 2010 11:48 AMIt has been increasingly evident that the only "plan" the maggots on Smith Hill have is reliance on perpetual federal "bailout" money.
Posted by: Tommy Cranston at May 21, 2010 7:02 PMTommy-for shame!!maggots at least serve a useful purpose-they consume rot and can be used to clean septic wounds.
The Smith Hill crowd are what maggots eat.