Whatever Progressives Might Wish to Be True, Money Must Be Made in the State
Financial analyst Lou Mazzucchelli offers the sort of economic opinion piece that we should expect from professionals in the field:
Entrepreneurs build businesses where there is economic opportunity. A large pool of investment capital is one measure of that opportunity. A cursory comparison of Rhode Island and Massachusetts shows the pool of venture capital in Massachusetts is at least 882 times Rhode Island’s. With six times our population, Massachusetts has 142 times the available venture capital per person. Why are Rhode Islanders chagrined about new business creation here? It only makes sense for entrepreneurs to go fishing where there are fish.
Measuring venture capital investment in Rhode Island and Massachusetts from all sources, not just in-state investment, we see the total amount invested in Massachusetts since 1995 was $45.5 billion across 5,773 investments, or about $7,000 per capita. Rhode Island attracted $687 million across 104 investments, or $654 per capita. Massachusetts saw 55 times the number of investments, and almost 11 times the investment per capita compared with our state.
Mazzucchelli speaks of “heavy assets” and “light assets,” the former being structures and established communities and the latter being more mobile. Universities are the former; military installations are the latter. Unskilled workers are the former; highly skilled workers are the latter. What Rhode Island needs, in a nutshell, is to attract light assets and leverage them to build heavy assets.
One method of doing so would function through taxation. Eliminate and decrease taxes of concern to people who invest preexisting wealth as their source of income (the rich) and who are sufficiently successful in their careers to generate a lot of income (the productive). That means eliminating the estate tax and the corporate tax and decreasing income and sales taxes to the lowest rates in the region. Then, structure investment taxes in such a way as to encourage investments to be made within the state. That means reducing the capital gains tax and eliminating it entirely on long-term investments within the state of Rhode Island.
I’d expect any revenue loss to the state to be temporary, pending the take-off of our way-over-burdened economy. But in the meantime, the state’s leaders simply have to admit reality. First, they should lower all social welfare expenditures below others in the region; give healthier states the opportunity to assist those for whom we lack resources. Second, resolve imbalances in goverment operations, such as the pension liability.
All it will take is a little intelligence and a lot of political will (which is why it probably won’t happen, leading the state toward insolvency).