Dual Purpose of the New 5.5% "Pension" Tax Exposed: To Discourage the Use of Non-State-Employees and To Gouge Yet Another Couple of Million from the Taxpayer

Who says? Why, the Director of the Department of Administration, Mr. Richard Licht, though he didn't actually use the words "gouge" or even "taxpayer". (Ah, the joy of euphemisms).

As Patrick noted, one of the few last minute amendments to the good-start-on-but-by-no means-comprehensive pension reform bill that survived a floor vote was a 5.5% tax on state services awarded to outside contractors - you know, the ones to which the state would not owe a pension, or vacation, or sick time, or a uniform allowance, or longevity pay, et public sector cetera. (Good job, Ian Donnis, clarifying this situation.)

[Donnis] asked Licht if the 5.5 percent assessment will curb the state’s use of outside employees. He responded:

That’s correct, and that’s actually the purpose of it. And independently of pension reform, our department is doing an analysis of contract employees, because there are instances where people working side by side — one works for an independent contractor, one works for the State of Rhode Island — yet they’re doing the same work.

(I'm shuddering as to the outcome of that analysis, by the way.)

Secondly, as to gouging. Possibly your reaction, when you heard about this new "assessment", was the same as mine: aren't the contractors just going to pass that cost back on to the state by increasing their bid by 5.5%??? In fact, that was the intent from the beginning.

Licht says the 5.5 percent assessment will be levied on the state. “The contractor doesn’t have to pay it,” he says. “It’s assessed against the state ...

Whew. The contractor doesn't have to pay it. The "state" does.

... wait a minute. The "state", in this case, means us taxpayers. It is our hard-earned money which funds the operation of state government! (Funny how Mr. Licht didn't actually phrase it that way. "The State" sounds so much more remote.)

Congratulations to the Governor for creating this win-win situation ... win-win solely for himself, that is: he looks good in the eyes of public employees by taxing non-state employee services and he looks good by funneling revenue to their pension fund from yet another tax-hole bored into our wallets.