Rhode Island Is Not Delaware – Why Not?
I’ve been sitting on this article for a few days because I couldn’t think of the best way to write about it. I guess in many ways, it’s just so obvious that there isn’t a whole lot to say. I’ll just throw it out there.
On June 30, the NY Times published the article: How Delaware Thrives as a Corporate Tax Haven. The focus of the article seems to be the tax dodging and the criminal aspects of it. Some states, like Pennsylvania, get angry about Delaware’s business-friendly tax laws and claim that Delaware robs them of their tax revenues.
State lawmakers in Pennsylvania are now trying to close the loophole, arguing that their state is being robbed of its tax dollars. Of particular concern is that many companies involved in drilling for natural gas in the Marcellus Shale region of Pennsylvania are, in fact, incorporating in Delaware instead.
“Delaware is an outlier in the way it does business,” said David E. Brunori, a professor at George Washington Law School and an expert on taxation. “What it offers is an opportunity to game the system and do it legally.”
Exactly, they do it legally. At least one state has set up an environment that is business-friendly to the point that many US corporations will actually seek it out to put an office there and pay tax dollars there. Even international entities will set up shop in Delaware due to their tax laws.
“Companies choose our state and we are proud of it,” said Richard J. Geisenberger, Delaware’s chief deputy secretary of state and its leading ambassador to business. “We spend a lot of time in the United States and traveling internationally to let people know that Delaware is a great place to do business.”
I’m sure some will turn up their nose at being “business friendly.” It must come at the expense of everyone else, right? If you’re going to be friendly to businesses, someone has to pick up the tax bill and the only alternative there is the lowly taxpayer.
So let’s take a look at Delaware’s tax rates, especially in comparison to Rhode Island, using the Tax Foundation’s numbers: DE RI
|State||Indiv. Income Tax Top Rate||Corporate Income Tax Flat Rate||Sales Tax||Property Tax Per Capita||Taxes Paid to State Per Capita||Unemployment rate|
*Total paid to the state is for 2009
According to those numbers, the residents of Delaware pay less in taxes and have an unemployment rate that’s just a little bit more than half of Rhode Island’s. Even better, they don’t have a sales tax, so that will also attract residents of neighboring states into Delaware for puchases. Like I said earlier, this sort of thing is just so obvious, what else is there to say?