Ushering in Further Decline with Cutsie Tax Changes
Legislative leaders are poised to unveil a sweeping plan as soon as next week that would bring fundamental changes to the state’s personal income tax system.
This may be one of the few times that I agree with a statement related to taxation coming out of the Poverty Institute, whose fiscal policy analyst, Russell Dannecker, advised legislators to “try to look for the unintended consequences.”
With respect to the tax code, the problem begins right at the General Assembly’s first statement of objectives. Requiring revenue to remain largely neutral means that necessary tax cuts in some areas have to be made up with tax increases elsewhere. Looking at the 9.9% top tax rate as the main culprit for detrimental perception of our tax climate focuses on a bullet point rather than the comprehensive list of ill-conceived policies.
As came up in recent conversation comparing Massachusetts and Rhode Island, the very progressivity of Rhode Island’s tax system is central to its revenue and demographic problems, attracting those with low incomes and repelling those with middle-to-high. I’m not suggesting that Rhode Island should shift its tax burden suddenly onto its poorest residents. What the state government should do is cut taxes at the top and middle brackets and then cut spending as necessary.
I can’t be alone in doubting the ability of the people who got us into our current budgetary mess to discern a careful path out of it.
As pointed out by a commenter, I had misread part of the article. (It’s been a very, very rough week.) I deleted the section related thereto.