Differing Interpretations of Tax Effects Play into Local Decision
Experts disagree about whether the seven legislative proposals to increase personal income taxes on "the rich" will have an adverse effect on Rhode Island's economy, but the complexity of such changes requires a more local debate.
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Providence (Ocean State Current) – Throughout the autumn and winter, the Occupy Movement filled newspapers with slogans pitting Americans from the top 1% in wealth against the other 99%, whom the Occupiers presumed to represent. That spirit has entered the General Assembly, this session, in the form of seven different proposals to increase taxes on "the rich."
Advocates tout a paper released this month by Jeffrey Thompson, an assistant research professor with the Political Economy Research Institute (PERI) at the University of Massachusetts. Reviewing research literature related to the effects of tax increases on wealthy residents, Thompson concludes that, in general, "modest tax increases on affluent households are unlikely" to change their economic behavior or drive them out of the state. It is more likely that they'll find ways to avoid the increased taxes, but such results "are not nearly as dramatic as the consequences predicted by some."
On the other end of the debate, the Rhode Island Center for Freedom & Prosperity (the parent organization for the Ocean State Current) expects significant consequences. Using a computable general equilibrium (CGE) model developed by the Beacon Hill Institute at Suffolk University, the Center predicts that the most cited tax increase proposal would cost the state 1,372 jobs and 1,000 residents overall, while falling $13 million short of advocates' $118 million revenue target.