CRIPs are out for More Tax Blood

Ian Donnis points to the Campaign for Rhode Island’s Priorities, who are going to “call on the Governor to bring close scrutiny to Rhode Island’s hidden budget of expensive tax expenditures!” More on that in a minute, but first a quick aside: Ian doesn’t think we at AR pay enough attention to “corporate welfare.” Well, maybe not as much as we should, but we aren’t exactly the champions of corporate welfare that Ian implies, either:

Nothing is more unjust to the working families and retirees of America than to over-pay for under-performance. In other words, not to get fair value for our hard-earned monies.
It is in that context where this blogsite has been appropriately critical of both public sector unions and private sector unions….No less of a problem in our society are the corporate welfare queens who exist like parasites living off their manipulation of a bloated federal government, thereby reducing many Americans’ standard of living through hidden and completely unnecessary taxes.

The post above specifically dealt with our tax dollars going towards sugar subsidies. And we’re no fan of ethanol subsidies, either. Anyway, point taken, Ian.
But back to the CRIPs. Good for them! It’s always nice when another group calls attention to how our tax dollars are being spent on over-generous programs and….er….oh wait:

Rhode Island’s structural deficit is costing jobs, public services and essential state programs that hard-working Rhode Islanders need to work, learn and stay well. The Governor’s solution is to cut even more — laying off hundreds of public servants and slashing already starved public programs. There is a more equitable solution to the state’s fiscal challenge.
A first step? Rhode Islanders need to know the real costs of the state’s hidden tax expenditure budget. Tax expenditures are credits and preferential treatment given some individuals and corporations that cost the state unknown millions in forgone tax revenue. The RI Department of Taxation was unable to estimate lost revenues from 60% of these special treatments. Rhode Islanders need to know: What are the real costs of the state’s tax expenditures and are we getting back the jobs, housing and other benefits promised?

Ohhhh. By “hidden tax expenditures” they mean money the State can’t spend because it isn’t getting it in the first place. OK, gotcha. So they don’t like tax incentives or subsidies going to private companies that employ people…who happen to pay taxes. Well, they do point out some questionable tax breaks, for sure.

  • RI has an income tax exemption for employees in software companies when they sell stock in their company. No other New England state has a similar exemption.
  • The sale of compressed air is exempt from the sales tax – even though no other New England state has a similar exemption.
  • Horse food is exempt from the sales tax.
  • Truth is, I agree with the general thrust of their effort here. The RI government probably lays out some targeted tax incentives that need to be revisited to determine if they are still worthwhile. So the CRIPs are onto something, but lets not kid ourselves. Their ultimate goal is to raise taxes to produce more revenue, er, reduce hidden expenditures (Is that right in the newspeak we’re using here?).
    Anyway, let’s say that everything they want done is accomplished, then we probably would see more short term revenue gains,er, fewer tax expenditures (now, that just doesn’t make any sense, does it? OK, I’ll stop)–until companies started running for the hills. Because removing these deals will have a price.
    If a company’s sweetheart deal goes away, how long before the company goes away and leaves the state? Then we can wave “bye bye” to that tax revenue. That’s the way it works in a competitive marketplace, so you have to do something to keep the company around. They aren’t going to stay here in RI, “just because.”
    The CRIP’s plan has the whiff of good government about it. Their desire to improve the State’s ability to forecast revenue changes resulting from tax subsidies is a good one. But the CRIPs are only dealing with part of the equation, which illustrates the sort of flawed base-line thinking endemic in their public policy world. Apparently, they don’t take into account how removing the incentives can also result in lost revenue (via subsequent corporate flight). Or how incentives can entice a company to come to the RI in the first place and thus employ people who will pay taxes.
    Even if they were to take a dynamic view, though, they’d still not be addressing the core problem. As I’ve written before, RI’s cut-and-paste economic development plan–which includes tax subsidies–needs to be changed.

    Crafting specific, sweetheart deals seem to only work so long as they are in place. Once they expire, off go those who took advantage of them. Instead, we need to follow a holistic plan. The entire business climate needs to change to first attract, and then maintain, new employers. Targeted business tax credits aren’t enough. What needs to be done is to lower the tax burden across the board and reduce the red-tape and regulatory roadblocks.

    Who thinks the CRIPs are looking to lower tax burdens in conjunction with the removal of tax subsidies? Me neither.
    I’ve shown in the past that we don’t have a tax revenue problem, we have a spending problem. Basically, tax revenue from all sources hasn’t gone down from 2001 to 2008, it has increased by about 26%. Unfortunately, tax revenue increases have been outpaced by increases in government expenditures, which have gone up 45% over the same period. Anyone feel like they haven’t been taxed enough?
    The CRIPs are playing a shell game. Yes, there are some problems, but their solutions–which they aren’t playing up this time around–include a whole slew of tax increases or reversions to higher tax rates (here or here). While it looks like they’re engaged in a good government endeavor, they really just want to get more-more-more when most of us recognize that the answer is to spend less.

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    Ian Donnis
    13 years ago

    Thanks for the reference, Marc, but my comment about corporate welfare was directed at those denizens of talk-radio who put a lot less thought in their comments than you place in your posts!

    Tom W
    Tom W
    13 years ago

    The Founding Fathers would be aghast at both corporate welfare and social welfare.
    Neither is a legitimate function of government. Anyone who favors one form of welfare cannot credibly decry the existence and practice of the other form of welfare, since they’re just different colored stripes on the same Zebra.
    Once FDR warped the Constitution’s Commerce Clause and made redistribution a “legitimate” form of federal action, i.e., government taking from one group of citizens (by coercive taxation and regulation), and giving the proceeds of same to another, our government became nothing better than a political bazaar in which politicians earn their “commission” from those who curry favor.

    Ian Donnis
    13 years ago

    Tom, did the exigencies of the Great Depression justify government efforts to help its many citizens who were in dire straits? Part of my point is how we tend to hear a lot more about “welfare cheats” than about “redistribution” via Reagan-style tax policies that overwhelmingly favor the super-rich.

    Tom W
    Tom W
    13 years ago

    >>Tom, did the exigencies of the Great Depression justify government efforts to help its many citizens who were in dire straits? Part of my point is how we tend to hear a lot more about “welfare cheats” than about “redistribution” via Reagan-style tax policies that overwhelmingly favor the super-rich. Ian, There are real issues regarding whether it was constitutional for the federal government to engage in the “New Deal.” Indeed, the U.S. Supreme Court ruled that such were unconstitutional, until it later succumbed to the (failed) attempt by FDR to pack the court with sycophants and the threat of continuing “persuasion” by FDR. After all, in the end the U.S. Constitution is the “rule book” under which the federal government is supposed to operate. In any case, even to assume for the sake of argument that the “New Deal” programs were within valid federal power, that emergency ended (reputable economists say due to WWII, not the New Deal programs). The programs remain with us, growing ever larger by the year, essentially a monument to socialist economic theory (it is inherently unjust for some to have more than others) or, as Winston Churchill put it so well: “The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” As far as “redistribution via Reagan-style tax policies” consider first the premise that in theory the premise should be that a truly “equal” and “fair” tax would be a per capita tax; each pays an equal share toward an equal benefit from government (e.g., police, defense). The “next fairest” is a flat tax / percentage of income, one single rate amongst the populace, each paying a proportional share toward the benefits of government. The current system is skewed such that about one-half… Read more »

    johnpaycheck
    johnpaycheck
    13 years ago

    the biggest boobdoggle of all is ri historic tax credits. but forget about getting rid of those. the unions love them because they artificially inflate employment for trades unions

    Tom W
    Tom W
    13 years ago

    >>the biggest boobdoggle of all is ri historic tax credits. but forget about getting rid of those. the unions love them because they artificially inflate employment for trades unions
    Unions have (and love) welfare too. Things such as prevailing wage laws and project labor agreements are government welfare for unions.
    That is another example of my point that no form of “welfare” is a legitimate function of government. All it does is to foster the creation of “special interest groups” kowtowing (or worse) to politicians, either seeking favors (enriching themselves at the expense of others via government action) or trying to defend themselves from special interests.
    Economists call this “rent seeking.”
    The only ones who benefit in the end are the politicians who get the attention (and money) of special interest groups who wouldn’t exist (and thus not shower their largesse upon politicians) if government had not been distorted into a machine existing to redistribute wealth.

    Mike
    Mike
    13 years ago

    All this back and forth blah-blah is a waste of time.
    The system in untenable, whether Laffey or Marcia Reback or Grace Diaz is governor makes a difference only on the timing of the state’s default.
    The seeds have been planted:
    Unaffordable pensions, health care and welfare benefits coupled with a rapidly fleeing productive class being replaced by Third World leeches and parisites- and a ruling class so cowed by the Socialists (Ian-if the shoe fits..) incessant “Racist!!!” cry that they admire the naked Emperor’s fine clothing rather than admit this simple truth.
    Harvest Day is coming.

    Greg
    Greg
    13 years ago

    I’ll float this idea here first with the knowledge that nobody will take it even remotely seriously.
    The Republicans need to NOT run a candidate for governor next term. The whole plan is collapse the state under a ‘Republican’ administration to therefore cement the sheep’s support of the Democrats.
    Please return to saying I need more tinfoil in my hat.

    John
    John
    13 years ago

    Greg,
    That is a fascinating idea. Indeed, part of me wishes Charlie had beaten Gov. Carcieri in 2006 — then we could add his name to Jennifer Graholm and Jon Corzine on the list of Democratic Governors who have been eviscerated by Democrat controlled legislatures (in Michigan’s case, the House, but not the Senate; in New Jersey, both). Frankly, the idea of not running a Republican candidate in 2010 and letting the inevitable collapse come on Cicilline/Caprio/Lynch/Roberts’ watch is well worth serious consideration. Their campaign theme song could be “And We Will All Go Down Together.”

    Marc Comtois
    13 years ago

    Ian: OK, thanks (and aw shucks)
    Tom W: Good stuff!
    Greg: {Marc takes out tinfoil box, stares at it a little too long…puts it back} That was close!

    Tim
    Tim
    13 years ago

    We know the benefits companies provide. They create jobs and they create economy and wealth. Those jobs and that wealth pay back into the system which helps to fund the very social program newtwork these poverty pimp CRIPS desperately need to remain relevant and empowered. Have the liberal denizens in the print media like Ian Donnis taken a critical look at the abject failure of liberal social policy here in Rhode Island? Or are those liberal denizens in the Rhode Island media like Ian Donnis content to the play the class warfare game?
    Btw are the CRIPS demanding a line item breakdown of the millions in expenditures found in the JCLS slush fund?

    Ian Donnis
    13 years ago

    Tim, speaking for myself, I can tell you that I have taken a critical look at some of the problems of the political status quo. A few of these include Harwood’s opposition to separation of powers; legislative Dems gaming the system during redistricting; Providence’s post-Cianci hurdles; the challenges facing the GOP and outsider candidates; the disparity between TV’s shrinking political coverage and the big bucks made through political ads; and how campaign finance reform might help to upset the balance in the General Assembly.
    I’m not really sure about what you call “the class warfare game.” Part of my point in contributing to this conversation is that we tend to hear a lot more about poor people gaming the system than rich people and corporations. Does it happen at both ends? Yes. I’m just asking for some balance and proportionality in acknowledging this.

    Mike
    Mike
    13 years ago

    What you and other Socialists refuse to acknowledge Ian is that in this state the public employees, with their bloated pensions, short work weeks, unaffordable pension COLA’s and lifetime free medical, complete dominance of almost every politician, etc. ARE the rich people “gaming the system”.
    If you truly wanted to do some “journalism” you would report on how (other than a handfull of fellow sewer dwellers like NYC, Jersey, Chicago, Boston, etc.) no place in the world gives police and fire “retire at 41” full pensions with lifetime COLA’s and free medical.
    As I have said, you and your fellow economic Marxists have planted the seeds.
    Harvest Day is coming.

    Ian Donnis
    13 years ago

    Mike, I am not a socialist nor a Marxist. We all know that RI faces serious economic problems. You lose your credibility when you sling this kind of rhetoric.

    Tom W
    Tom W
    13 years ago

    Though we’re probably about 180 degrees apart on any given issue, I have to support Mr. Donnis on this one.
    SOME left-wing posters here have been fast and loose with their verbiage, in which case reciprocity is warranted, or at least OK.
    So far Mr. Donnis has been civil / posted with decorum, and so long as that continues I believe that we should be civil back to him.

    Monique
    13 years ago

    “It is in that context where this blogsite has been appropriately critical of both public sector unions and private sector unions.”
    Anything and everything in the Rhode Island budget is up for discussion and modification. But it is difficult to get away from the numbers. Rhode Island is worst in the nation in terms of corporate tax climate. Yet we offer the maximum (five years) in social welfare benefits.
    As for corporate taxes, Marc nailed it with his prior post, referenced here. We need a holistic plan. Motivating corporations to come here with one-off tax incentives (as fun as it is to see a bad politician like Steve Alves get tripped up by one) is a major indicator of a systemic problem.

    Monique
    13 years ago

    The perils of rushing. Please disregard the prior quote from Ian Donnis, which was irrelevant to my comment, and substitute my own: Ian was right to put all forms of welfare on the table for discussion.

    John
    John
    13 years ago

    First, I think it is great that Ian is posting here. I also think it is critical that the tone of this site rises above another well known ri site where fact free ideological screeds seem to rule the day. I don’t disagree with Ian about all forms of government subsidy via taxes being open to question. For me, the high point of tax reform came under Reagan, when he pushed through a major simplification of the federal tax code (e.g., taxing income and dividends at the same rate, etc.). Frankly, I also think that chasing tax benefits (or other deals from the RI General Assembly) is a leading indicator of a company that is losing its competitive edge. States competing with each other to offer the most enticing benefits to attract investment is ultimately a race to nowhere. On the other hand, more than a few companies have taken a hard look at the emerging state fiscal picture and ceased giving tax benefits much weight in their location decision process. I wouldn’t be surprised if a lot of the tax breaks given in RI have been just as prone to waste and abuse as RI’s multitude of welfare programs. As for raising taxes on the rich, at the state level that is ultimately a losers’ game. Here I disagree with Ian — the most prevalent form of the “gaming the system” he condemns is nothing more or less than people moving out of RI to more favorable tax environments. And before all the Ellen Frank acolytes in the audience leap to their keyboards, I acknowledge that people don’t just move for tax purposes — however, it is undeniable that in many cases, taxes were a statistically significant, if not exclusive, factor in the decision to leave RI. If that… Read more »

    Tim
    Tim
    13 years ago

    “Tim, speaking for myself, I can tell you that I have taken a critical look at some of the problems of the political status quo. A few of these include Harwood’s opposition to separation of powers; legislative Dems gaming the system during redistricting; Providence’s post-Cianci hurdles; the challenges facing the GOP and outsider candidates; the disparity between TV’s shrinking political coverage and the big bucks made through political ads; and how campaign finance reform might help to upset the balance in the General Assembly.” All well and good Ian but I don’t see where you’ve taken a hard look at the extensive and expensive social service network here which not only doesn’t eradicate poverty but exacerbates it in many ways and does so generationally. Btw looking forward to your story on ~Speaker Murphy’s~ continuing opposition to SOP and his all around bad government tenure. Been 5 years since Murphy took over from that other SOP champion John Harwood. Can’t see much of a difference in their ways of doing business. When is the media going to focus on this state’s most powerful pol Speaker Murphy and his lack of accomplishment in office? Or is it easier just blaming the governor for everything because then you won’t step on any Democratic toes? “I’m not really sure about what you call “the class warfare game.” Part of my point in contributing to this conversation is that we tend to hear a lot more about poor people gaming the system than rich people and corporations. Does it happen at both ends? Yes. I’m just asking for some balance and proportionality in acknowledging this.” All I’m asking for is some balance and porportionality from the old media Ian. The class warfare game I’m speaking of is right out of the Democratic party handbook and… Read more »

    John
    John
    13 years ago

    Spot on with that last comment, Tim. Unfortunately, it is a point lost on too many people on Smith Hill.

    Ian Donnis
    13 years ago

    John, In response to your question, my personal view is that it makes general sense for RI’s tax climate to be similiar to those of our contiguous states, for the obvious reasons.
    Tim, you seem to be conflating your view of the media as a whole with me as one journalist. I don’t blame the governor for everything. I have written critically about Dems, in the General Assembly and elsewhere, and will continue to do so.
    While you believe that the rich get a bad rap, I believe the opposite is true, and that we tend to hear a lot more about gaming of the system by the poor than by the affluent. I’m not referring specifically to tax breaks. What about the graft and crony capitalism going in Iraq, the way in which powerful and lucrative US corporations sometimes pay little or no taxes (a situation described by William Greider in his book, Who Will Tell the People?), etc.

    Justin Katz
    13 years ago

    What’s mystifying (although I’m not indicting you specifically, Ian), is that liberals’ observation that those with wealth and power can game the system leads them to conclude the solution to be the elevation of another wealthy and (especially) powerful group to create complicated regulatory structures.
    One might argue that the desire to use taxes to control behavior and manipulate society leads to an odd alliance with the contingent of people with the money to tiptoe through byzantine tax laws.
    Me, I’m for clarity: a flat percentage-based tax (adjusted for family size, specifically children and married spouses) on all sources of income, with allowance of certain retirement and healthcare pretax set-asides. Nowhere to hide. Nothing to game.

    John
    John
    13 years ago

    Ian,
    One small but important point. Officers and directors of publicly traded companies have a fiduciary obligation to maximize the value of said companies to their shareholders (whch, I never cease to point out, includes quite a few union and public sector pension funds). Acting within the current law and regulations to minimize the taxes a company pays is one aspect of that obligation. If you don’t like the low corporate tax payments that result, by all means advocate for changes in the law. But don’t demonize corporate boards and directors for carrying out their fiduciary obligations.

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