Scott MacKay Commentary: Time For Deep Breath On RI Statehouse Tax Cuts

Jan 23, 2015

Cutting taxes is all the rage at the Rhode Island Statehouse.  RIPR political analyst Scott MacKay wonders why lawmakers are talking about tax cuts before dealing with the red ink in the state budget.

Rhode Island Statehouse
Credit Kristin Gourlay / RIPR

Take a stroll through the corridors of  McKim, Mead and White’s marble palace on Smith Hill and you’ll likely bump into a lawmaker with a plan to cut taxes.

Since the General Assembly came back into session a few weeks ago, every day seems to bring another idea for trimming tax burdens. There’s House Speaker Nick Mattiello’s proposal to eliminate state income taxes on social security and pensions. And Rep. Joe Shekarchi’s plan to cut business taxes for companies that create jobs in the Ocean State. Then along comes Sen. Jim Sheehan with an initiative that would get rid of business franchise levy for new companies.

Ok, nobody likes to pay taxes. Yet, as jurist Oliver Wendell Holmes famously said, ``taxes are the price we pay for civilization.’’

Every politician who wants tax reductions claims to have a solid rationale.  Speaker Mattiello, the most powerful   Statehouse figure, says cutting taxes for older Rhode Islanders would keep retirees – and their spending money – in Rhode Island. Shekarchi asserts his job-creation tax reduction would mean so many new jobs in the state that it would pay for itself. And Sheehan opines that his tax cut would attract new businesses to set up shop in our state.

Yet there is much to be done before lawmakers scurry to slash taxes with the speed they line up for an open bar at one of those legislative campaign fund-raisers that fill Providence hotel ballrooms just about every week the Assembly is in session.

First, let’s see what the budget looks like. The Rhode Island Public Expenditure Council  projects a $34 million shortfall in the financial year that ends June 30th, and another $200 million hole for the year that begins July 1.

It would, of course, be foolish to cut any taxes until lawmakers put the state’s finances on a path to solvency.

Which begs bigger questions. If Rhode Island government can afford to reduce taxes, which tax cuts would be most effective?

Let’s start with a big-picture study of what is going to help make our state competitive in a 21st century economy too many of  our citizens aren’t ready to compete in.  And if taxes can be decreased, which would be a fair way to help ordinary Rhode Islanders who work hard and play by the rules but can’t make ends meet?

Is giving wealthy elderly citizens a break really the best thing for our struggling state? As Gary Sasse of the Hassenfeld Institute at Bryant University points out, ending state income taxes on social security and pensions would mean nickels and dimes to elderly families making $30,000 to $50,000 annually, while giving those with incomes of $200,000 or more $1,600 a year.

Wealthy elderly people aren’t going to stay in Rhode Island just because the state gives them an extra $125 a month, says Sasse. So lawmakers ought to be wary of assertions that this tax decrease would help our economy. If our policy aim is to keep the well-off elderly in the Ocean State, maybe abolishing the estate tax is the way to go? Or, given our winter weather, is it realistic to think older Rhode Islanders will spurn the Florida sunshine (not to mention Red Sox spring training) for a chilly walk in Goddard Park?

On the fairness angle, would it make more sense to reduce the nettlesome car tax on older models. That would help younger workers and folks struggling to support families. Or maybe help cities and towns stabilize property taxes?

In a state that Rhode Island Kids Count says has the highest child poverty rate in New England, would tax relief for families be a better investment?

One thing we know: The Democrats who control the Assembly seem to be in another world compared to President Obama. The Democratic president in his State of the Union address last week focused on investing in tax and investment policies aimed at expanding the middle class, such as raising taxes on the super wealthy and ensuring that a college education is affordable for a new generation of Americans.

Cutting taxes for wealthy old folks at the expense of financing their grandkids education would be the height of folly.

And it seems ridiculous to even talk about tax-cutting at the Assembly before our new governor, Gina Raimondo, has even proposed her first budget. She ought to get a bit more time to enjoy her honeymoon.

Cutting taxes will always be politically popular. So was giving Curt Schilling’s video game company $75 million in taxpayer money. Our lawmakers must be reminded every day how that turned out.

There is no time like now for prudence to trump expediency at the Rhode Island Statehouse.

Scott MacKay's commentary can be heard every Monday at 6:50 and 8:50 on Morning Edition and at 5:44 on All Things Considered. You can also follow his political reporting at RIPR.org at the `On Politics' blog