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
Delaware 6.75% 8.7% 0% $712 $2,432* 6.8%
Rhode Island 5.99% 9% 7% $2,019 $3,290* 11%

*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?

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mangeek
mangeek
9 years ago

Basically, I agree. If our problem is unemployment, we should be shifting more of the burden onto individuals, if only to attract more business.
Lowering and broadening the sales tax in order to boost commercial real-estate and entry-level retail jobs is a no-brainer.
Still, the per-capita tax in RI is 35% higher than in Delaware, and nothing short of drastic measures will fix that.
Another crazy tax idea: Have the state (not cities) run the assessment and collection of city taxes, then reimburse the cities directly. We could cut an entire office from each municipality. Same for payment processing, and purchasing, and the solicitor’s office, and board of canvassers, and records. Just move that all up to the state level and run the offices as businesses. Towns that don’t participate have their reimbursement (now pretty much their only source of revenue) cut.

Dan
Dan
9 years ago

Delaware has created a race to the bottom and must be stopped through the coercive power of the Federal government so that socially just states, such as Rhode Island, can compete on an equal economic playing field and thrive.
Oh, for any progressives readers out there, that was a joke.

Tommy Cranston
Tommy Cranston
9 years ago

Let’s recreate the California Miracle-they raised income taxes to 14%, sales taxes to 11% and turned the most gorgeous state in America into a third world s***hole.
Now THAT is progressive.

Sammy the tax man in AZ
Sammy the tax man in AZ
9 years ago

Patrick:
Your numbers in the right hand column are reversed, in error
per capita tax collections for……. RI $2439 Delaware $ 3092
Making Delaware the 9th highest and RI 18th in the nation
Citation taxfoundation.org/blog/monday-map-state-tax-collections-capita
Your welcome Sammy

Patrick
Patrick
9 years ago

Sammy,
Source: taxfoundation.org/article/delawares-state-and-local-tax-burden-1977-2009
and
taxfoundation.org/article/rhode-islands-state-and-local-tax-burden-1977-2009
4th column

Warrington Faust
Warrington Faust
9 years ago

Delaware has been the “it” state since J.P. Morgan’s time. Sort of in the way that Florida decided to become a retirement haven by eliminating any inheritance/estate tax, and North Carolina favors military retirement. It was a long development, but RI might as well get started. Let’s pick a target instead of just lowering taxes, that is a goal, not a plan.

Sammy in Arizona
Sammy in Arizona
9 years ago

From the tax foundation ? ?
taxfoundation.org/blog/monday-map-state-tax-collections-capita
or
taxfoundation.org/sites/taxfoundation.org/files/UserFiles/Image/Blog/collections_2010_large.png
Their numbers….not mine ? ?

KenW
KenW
9 years ago

Kiplinger Retiree Tax Heavens (and Hells) ranks Delaware is one of the tax-friendliest states for retirees in the top 10.
Kiplinger Retiree Tax Heavens (and Hells) ranks Rhode Island as one of the worst states for retirees in bottom 10.
Kiplinger Retiree Tax Heavens (and Hells) web link: //www.kiplinger.com/tools/retiree_map/

Monique
Monique (@monique-chartier)
Editor
9 years ago

Just in time to punctuate Patrick’s post, CNBC has released their ranking of states for business. Guess which state is at the bottom of the list for a second year in a row?
m.cnbc.com/us_news/47818860

helen
helen
9 years ago

We don’t have to re-invent the wheel. We can copy more successful states,with any tweaking needed to fit our circumstances. Why don’t we do that? Why?

ANTHONY
ANTHONY
9 years ago

Helen…”Why don’t we do that? Why?”
I grew up in RI in the 70’s. The SAME problems exist. The “why” is about cronyism and nepotism laced with corruption. All hail Buddy Cianci the “hero” who sold out to the unions for votes. As that famous RISD student put to song…”Same as it ever was”. You may ask yourself….
http://www.youtube.com/watch?v=I1wg1DNHbNU

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