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.