Hey, Rhode Islanders: You Just Gotta Live with the Taxes. They’re Immutable!
Anthony DiBella’s column in yesterday’s Providence Journal has to be read to be believed:
The immutable fact is that the bulk of a state’s revenue is based on scale or size. Unless we are going to merge with Massachusetts or Connecticut or become part of the United States of New England, we will always be at a relative disadvantage when it comes to tax liabilities. Even the governor’s experience as a corporate executive should tell him that operational efficiencies derive primarily from economies of scale.
There are fixed, unavoidable costs to run any organization: salaries for employees, utility bills to heat offices and expenses to buy, lease or maintain equipment. Large states can apportion expenses over a large set of assets that reflect taxing capacity. …
With regard to land area, we all know that we are the smallest of the 50 states, but relatively speaking, we are even smaller than that. Alaska, the largest U.S state, is over 570 times the size of Rhode Island. Our biggest neighbor, Massachusetts, ranks 45th in size but is nearly 8 times larger than us. Then there’s the size of our population. As of the 2000 census, Rhode Island ranked 43rd, but again, relatively speaking, the state with the largest population, California, is over 33 times our size. Putting together these data regarding land area and population, the only surprise about Rhode Island having the 7th highest property tax rate in the nation (according to a brochure used to promote the Narragansett Indian Casino last year) should be that it isn’t higher.
Considering that DiBella writes as if Rhode Island’s 30th out of 50 median household income (not, apparently, adjusted for our high cost of living) and as if our 37th out of 50 “competitiveness” are positives for the state, readers may be forgiven for suspecting that his conclusions are a priori. “It’s foolhardy to presume that the principle cause of our high taxes is frivolous or unnecessary state services,” he writes. Apparently, it is incumbent upon small states to offer extended welfare benefits compared with the rest of the nation, including their neighbors, and to give lifetime benefits to part-time crossing guards.
The centerpiece of any solution, according to DiBella, must be a consolidation of “as many functions as possible.” Somehow, I suspect the state’s power mongers have a fondness for such solutions. And somehow, I don’t think the supposed naturalness of the high tax burden in Rhode Island will stop the people who actually pay the bulk of the taxes from leaving.
Myself, I’m more of the Edward Achorn school of thought:
Last week, the nonprofit research group The Tax Foundation released its annual rankings for business tax climate.
Where did Rhode Island finish? If you guessed dead last, you’ve probably been reading the newspaper during the last several years.
The report makes clear that the Ocean State could hardly do more to scare off economic growth — you know, the jobs people need if they are to survive and pay sky-high taxes to support all those who depend on government. Rhode Island beat out New Jersey, New York and California for the highly dubious honor. …
Rhode Island ranked 50th — dead last — in job creation from 2003 to 2006 and 42nd in production growth, says Tax Foundation economist Curtis Dubay, citing data from the U.S. Bureau of Labor Statistics and the Bureau of Economic Analysis.
It ranked 49th in population growth, as the middle class (notably including retirees) fled for less punishing states. While the nation’s population has grown almost 3 percent, Rhode Island’s fell over half a percent
Its income growth was 48th. While America’s income grew almost 19 percent between 2003 and 2006, Rhode Island’s grew at just under 14 percent.
Its state and local spending per capita ranked 9th highest in the country.
Those are terrible, even scary, numbers.
The one correction that I would make to Achorn’s column is that his characterization of Rhode Island’s quality of life as “superb!” does not apply to those many families whom the state forces to struggle to get by. Or those who must watch their children depart in order to find opportunity, or (for that matter) those who find themselves without it. A family that can’t afford a night of cultural events is not made richer by them. Parents who must work seven days a week experience festivals as mere news stories, and those could come from anywhere.