Strange Agreement on Income Tax Changes

So, the revised income tax scheme is now law, and we’ll soon enough find out whether it’s actually beneficial or just shuffles some numbers around. I continue to be suspicious that it’s just a roundabout way of freezing the flat tax with a positive spin. I’m also concerned that it further favors those who are less productive and less economically active, which puts me in an uncomfortable agreement with left-winger Peter Asen, of Ocean State Action:

Peter Asen of Ocean State Action, a coalition of community organizations and unions criticized the law, saying it does not do enough to help taxpayers. He said that some of the credits being eliminated, such as the mortgage-interest deduction, may hurt middle-class families.

As I’ve said, the flat tax and phasing-out capital gains tax had been maintaining Rhode Island’s wealthy population, but the productive class (including, essentially, the middle and upwardly mobile working classes) has been fleeing the state. On top of which, Rhode Island’s welfare system and tax code have actually being attracting those who would be an overall drain on our economy. This legislation appears to worsen the situation for productive working/middle class families (by eliminating itemization) and to worsen the expected situation for upper-income residents.
Consider this, from the folks at the Tax Foundation blog, which generally likes the new law (albeit tempering its praise with a list of other things the state should look at):

I should note that at the last minute, the proposal was made revenue-neutral by phasing out the standard deduction for high-income earners, a tactic also used in Utah and Maine recently. This results in a higher marginal effective tax rate than the statutory rate…

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Tommy Cranston
Tommy Cranston
13 years ago

Don’t fret progressives; if one of the Lucky Sperm (Caprio, Lynch, Chafee) wins it will be back up to 9.9% in no time.
Got to feed those cronies, union vampires, illegal aliens, non-profits, babysitters and other worthy causes!

13 years ago

Good move to lower the top rate down to closer what most other states are charging.
But I’m a bit confused about the moniker “Productive Class” and then the description of them being the middle class. All the talk here has focused on John Galt and defense of the very wealthy……
I think any rational person should fail to buy ANY argument that one particular group is productive and another not so. Justin uses terms such as “not economically active”, which are frankly some kind of new talking point. Hey, Justin, where did you copy that one from?
What if a guy like you or I wants to work, make some money, live extremely frugally and therefore be “less economically active” than many? Is that now frowned upon in New England?
Politics is the art of trying to bring as many people as possible into a situation where they might not like it, but they at least tolerate it. Anything loved by one socioeconomic group is bound to be despised by another. That does not make one group bad or good, rather it might make for compromise in which most people get at least a basic shot at living in happiness. You cannot ask for much more from your government…the rest is up to each of us as individuals, workers, neighbors, families and friends.
Anyway, as long as they don’t screw with the sales tax – high enough as it is – this may be an improvement.

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