Alves in His Own Words

Perhaps the most ear-catching thing that Senate Finance Committee Chairman Stephen Alves (D, West Warwick) said to Dan Yorke yesterday afternoon was that we, the taxpayers of Rhode Island, “don’t pay [legislators] enough money to sit there and spend all hours of the night up there” — as if being a state legislator is a bit like being a part-time contractor.
There’s something more subtle that ought to be considered, in Alves’s performance, both on Dan’s show and in a Steve Peoples piece in the Wednesday Providence Journal. Peoples’s article emphasizes legislation that Alves is purportedly drafting “to adopt sweeping pension changes that would establish minimum retirement ages, limit annual increases and reduce disability pensions for thousands of local firefighters, police officers and municipal workers,” but consider the following clips from the radio:

Yorke: Do you understand how frustrated people are that Steve Alves didn’t call to clarify a few things to save millions and millions of dollars in expenses? Do you understand how frustrated people get when they hear the ideas to help us out of our fiscal morass end up being increased fees and taxes an d not expenditure reductions?
Alves: Expenditure reductions, I mean, we are doing many expenditure reductions. … When you see the supplemental coming out, cutting off the number of families in our state healthcare program. …
Alves: Part of [the governor’s supplemental] was predicated on getting some union concessions, of which we have been waiting for. That’s something beyond our purview, and that’s something that the governor and the unions, and to this day we still haven’t received a plan. … [also mentions tax credit reductions] …
Yorke: We can no longer afford the incredible benefit programs that public employee unions have in this state. That’s the break of the back.
Alves: Don’t forget, two years ago, we changed the pension system for every state employee.
Yorke: A minor adjustment.
Alves: It isn’t minor. It saved the state tens of millions of dollars.
Yorke: A minor adjustment to the individual. It was a minor adjustment.
Alves: Dan, I think if you turned around and looked at it, it wasn’t a minor adjustment. I mean, you went from people who thought that they could retire at one point at fifty years old to fifty-nine years old. I mean, we’re talking about an extra ten years of working whether you have thirty years in. I mean, we did away that. We have lowered the maximum amount that they can receive in their pensions. So we have done tough decisions with them.

So readers of the state’s major newspaper receive an image, with the clouds in their coffee, of the hard-nosed Senate Finance Committee chairman standing firm in the tough fight against unionized public sector employees, but during his afternoon chat on the radio, the very same senator neglects to cite his valiant effort — even while under fire for only talking about revenue increases.
On the other hand, his on-air clarification of the corporate income tax was very detailed. Currently, corporations in Rhode Island pay at least $500, or 9% of their net income above that, which (as Monique pointed out last night) puts the net income threshold for taxes above the minimum at $5,555. According to Alves, this leaves 94% of Rhode Island corporations paying the minimum. Now, with the unexplained shift to gross receipts, Alves observes the following (to Dan):

  • 358 corporations with more than $10 million in gross receipts currently pay minimum.
  • 426 corporations with $5–10 million in gross receipts currently pay minimum.
  • 818 corporations with $2.5–5 million in gross receipts currently pay minimum.

So how do all these businesses manage to net less than $5,555 despite millions of dollars of gross receipts? Alves’s explanation of the iniquity is “offshore accounts to divert their income.” The greedy corporate types have methods for hiding their income that the average Joe lacks. Before we get to the anti-business rhetoric, though, I’d suggest that at least two categories of businesses should be removed from the list of villains: companies that gross millions but use most of that dough to pay for expenses and compensate employees and S-Corps that pass most of their earnings on to stakeholders who pay taxes on it as income.
Surely such innocent and upstanding parties will be among those asked to pay the additional $10.2 million in taxes that Alves proposes to collect in general revenue (with the RI politician’s promise that it will be sent to cities and towns), according to the following scheme:

Gross Receipts New Tax Payment Net Revenue to Pay
the Equivalent Currently
Under $250,000 $500 Under $5,555
$250,000 to $500,0000 $750 $8,333
$500,000 to $1 million $1,250 $13,889
$1 to $2.5 million $2,000 $22,222
$2.5 to $5 million $2,500 $27,778
$5 to $10 million $3,500 $38,889
Above $10 million $5,000 $55,556

The third column of back-of-the-envelope calculations is what companies would currently have to net in order to pay the same amount at the current rate of 9%. That’s if the state’s take remained the same, but as Alves explained, the state’s take is going up, which means that the net revenues of companies paying each amount would actually be lower.
Given his attention to detail on the tax-raising count, one can have little doubt that Alves intends to follow through with this one of the two proposals that Steve Peoples describes as having “drawn sharp criticism.” Considering that Alves had apparently forgotten the other one before dinnertime yesterday, my hopes for its realization — at least with his tutelage — are not high.

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Monique
13 years ago

“Expenditure reductions, I mean, we are doing many expenditure reductions. … When you see the supplemental coming out, cutting off the number of families in our state healthcare program.”
All of these “expenditure reductions”. Do they equal the magic number of half a billion dollars a year? Then perhaps that task is not complete.
As for the pension reform a couple of years ago. First of all, was anyone vested in the pension system or currently collecting a pension affected by it? My recollection is no.
Further, in one sense, such a dramatic shift – from stated benefits to 401k – is not a minor adjustment. Yet compared to the extent of the deficit which was created by excessive (and unnecessary) generosity in many areas, including pensions, and the corresponding size of the job of cutting back that generosity in all those areas, it was a minor adjustment.
The proposal by the Republican caucus – a 10% across the board cut – is looking like the most sensible and the most fair route at this point, especially given the size of the deficit to be dealt with.

Aldo
Aldo
13 years ago

Do any of you really think that Alves is motivated by a desire to save the taxpayers money or for pension reform? Can everyone really be that STUPID? Why doesn’t he go after the Judiciary’s pensions? Think about it? 100% for life. Even the surviving spouse is entitled to the full pension. How much do they contribute? It is a travesty. As for the police, firefighters and municipal employees, at least they contribute to their own pensions. By the way, perhaps you might look into the Senator’s financial background. He was a member of the State Pension Board until the Separation of Powers initiative removed legislators for state boards and commissions. Why didn’t he do anything at that time? As Chair of the WW Pension Board, he brought in a subsidy of UBS Paine Webber as the financial advisor. At the time the unfunded liability was only $1.4 million. By the time he left the Pension Board it had grown to over $23 million. His close political associate was hand picked to continue. The unfunded liability for West Warwick’s taxpayers is now over $57 million. In case you didn’t realize it, approximately one year after bringing UBS onboard in West Warwick, the same financial advisor that he had hired in West Warwick played a role in his being hired as a VP at UBS. Draw your own conclusions…. Seems a real coincidence that in June of 2002; UBS and associated law firms “earned” over $4.7 million in fees for the Tobacco Securitization deal. His name has been linked to convicted felons Todd LaScolla and Brian Sarrault for questionable pension deals. How much did that cost the taxpayers? I guess this latest move on his part is just about protecting RI taxpayers right? Draw your own conclusions…. Why don’t you ask… Read more »

rhody
rhody
13 years ago

Steve Alves is just a two-bit hoodlum who relies on fears and intimidation. If only West Warwick had some Gary Cooper types with the nads to stand up to him.

Aldo
Aldo
13 years ago

I guess you don’t read the Projo?
Check out RISupremecourt.com

Ragin' Rhode Islander
Ragin' Rhode Islander
13 years ago

Maybe he knows he’s going to be indicted soon anyway and is acting as spear catcher for Montalbano and the rest of the “leadership” to get the the tax increases out on the table, so that come the May revenue estimates the Democrats can disingenuously claim that the “shocking new numbers” now “force” them to raise taxes.
All public employees should immediately be converted into a 401k plan. The private sector where we taxpayers work has eliminated pensions – they’re nice to have, but we can’t afford to pay for theirs when we have to try to put money aside to fund our own 401ks.
The union bosses that control the General Assembly shouldn’t have stood by and let their Democrat stooges rack up billions of dollars of unfunded liabilities. It should be their problem, not ours.
I don’t feel any obligation to suffer financially to bail out the pension system just so that teachers and the rest can retire at 49 with fat pensions, when I’m not going to get any pension at all and won’t be able to retire until my late 60’s or 70’s (if I’ll be able to retire at all).
Screw ’em!

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