Roland Benjamin: “It is time for a bold solution that eliminates the corporate income tax in Rhode Island”
Massachusetts Governor Deval Patrick visited Rhode Island last evening to discuss his state’s triple-casino proposal, but Roland Benjamin thinks there are better ways for Rhode Island to compete with Massachusetts than by expanding gambling here…
Quite a stir regarding the “not quite dead yet” Casino discussion. The debate reopens in response to rumblings from Massachusetts discussed in the Projo here:
Murphy said gambling revenue critical to the state budget, which is projected to run a deficit for the next few years, will drain away to Massachusetts without action to protect Rhode Island’s slot parlors.It’s doubtful that the primary intent of the Speaker is to “protect” the slot parlors. It is more plausible that the revenue streams to the General Fund are more coveted. After all, that’s what they are looking for in Massachusetts.
Patrick estimates the casinos would create 20,000 permanent jobs and raise $400 million in new annual revenues for Massachusetts.So the competing power brokers in the two states are looking to tap into a stream flowing largely into Connecticut, with some residual to Lincoln and Newport. The arguments always reference jobs and economic impact. But it is important and non-trivial to note that these casinos thrive off of wealth generated in other segments of the economy. They create no new wealth for anyone save a handful and end up effectively taxing the entire gaming population.
Instead of taking the Me-Too approach, Rhode Island could view this as an opportunity to take an aggressive competitive stance with neighboring New England states. Why not go after an economic sector that creates wealth instead of one that consumes it? This would be a tremendous challenge given the current business climate of the state and the country for that matter.
According to this KPMG study, the United States compares somewhat horribly to other countries with respect to corporate income tax rates. Of the 60 countries represented, the U.S. has a marginally lower rate than only 5 countries before adding in any state income taxes. Taken in conjunction with this study from the Tax Foundation, Rhode Island ranks worst among states in business tax climate. Add our own corporate income tax rate to the federal rate and the Rhode Island business tax climate is the worst on the planet.
It is time for a bold solution that eliminates the corporate income tax in Rhode Island. After all, corporate income taxes are nothing more than an indirect tax on the employees working for the affected corporation or its owners. Dollars flowing to stakeholders (employees, shareholders, customers, etc.) will be taxed anyway, and dollars staying in the organization will be invested to generate more wealth for more people. Since corporations are far more able to move operations and capital to tax friendly regions, the brunt of this impact is felt by the actual workforce according to this CBO analysis.
Given those values, when capital is perfectly mobile and the tax does not affect the world prices of traded goods, domestic labor bears slightly more than 70 percent of the long run burden of the corporate income tax.Because we do not have a competitive climate when compared to neighboring states, the effect on the workforce is even greater as many find employment in Massachusetts or Connecticut. But if Rhode Island were to slash the corporate income tax rate to zero, we would compete across ALL economic sectors, not just gaming. We would eat their proverbial lunch in attracting wealth creating business to our state. We would not have to worry about negotiating revenues from slot machines. Until we do something bold, every business that starts up or expands in Massachusetts is a missed opportunity here in Rhode island.