Do you see RI as providing opportunities for prosperity? Families are fleeing from our borders. The equivalent of 11 cities and towns wiped off map as people vote with their feet.

Eleven Towns Wiped Off Map as RI ranks 45th on 2017 Family Prosperity Index

Eleven Towns Could be Wiped Off Rhode Island’s Map As State Ranks 45th Nationally on Updated 2017 Family Prosperity Index

 

Crippling out-migration problem demands a new policy approach. Perhaps nothing is more telling about whether Americans see a state as providing sufficient opportunities for prosperity and a better quality of life than whether or not they are flocking to or fleeing from its borders. No other measure paints a more realistic picture of whether or not a particular state is an ideal place to raise a family or build a career than how people “vote with their feet.”

In this regard, Rhode Island is losing the state-to-state migration competition. Shockingly, since 2004, the State of Rhode Island has lost the equivalent population of 11 of its 39 cities and towns to out-migration. On net, over 80,000 more Rhode Island residents chose to leave our states than residents of other states chose to move here.

While America’s population grows, the Ocean State’s population remains stagnant because of such out-migration losses. Combined with the widely reported fact that the incomes of those coming to Rhode Island are lower than those leaving, Rhode Island’s overall tax base is on an ominous downward spiral. Some would call it a “death spiral.”

Out-migration losses are a contributing factor Rhode Island’s total labor force actually experiencing a decline in recent years. Although labor force decline is a negative factor, counter-intuitively, it has improved the state’s increasingly unreliable unemployment rate metric.

Strong families are the backbone to a free and thriving society. The root of this out-migration problem can best be captured by the Family Prosperity Index (FPI). As the most in-depth research on family well-being ever conducted, the FPI compiles 60 national indexes into 30 secondary categories as part of six major categories: Economics, Demographics, Family Self-Sufficiency, Family Structure, Family Culture, and Family Health.

This out-migration problem was highlighted in the Center’s original 2016 Rhode Island Family Prosperity Index report, where the Ocean State ranked a dismal 48th among all states.

In the updated 2017 FPI , while Rhode Island improved to 45th nationally, up three spots from 2016, the state suffers from a bottom-third ranking in five of six major categories and 16 of 30 secondary categories. The state ranked in the top-third in just six of the 30 secondary categories.

Despite this mild improvement, a more disturbing long-term trend is emerging. In the past five years, Rhode Island’s score in the important major category of Family Self-Sufficiency has declined by 9.8%. Over this same period, the Ocean State also saw declines in Family Structure, Family Health, and its overall FPI score, albeit with increased scores in Economics, Demographics, and Family Culture.

Combined with a separate measure that saddles Rhode Island with the worst-ranked business climate in the  nation, this one-two punch to the gut has been insurmountable hurdles for many Ocean State families and businesses to overcome.

Todd Sandahl family

Todd Sandahl and family

Todd Sandahl is one of those 80,000 individuals who felt compelled to make the difficult personal choice to uproot his family and move to another state that offered more financial security. An electrical engineer by trade, Sandahl couldn’t find meaningful employment in Rhode Island and became tired of his long commute to Massachusetts. He decided to pack his bags and head to Colorado for more opportunities, when he saw no future in the Ocean State.

FPI: a strategic roadmap. Rhode Islanders understand that better opportunities for prosperity can only be realized if more and better businesses create more and better jobs. Connecting the dots, it appears that Rhode Island’s poor opportunity for prosperity is a major reason why more people choose to leave our state than those who choose to come.

Rhode Island’s Family Prosperity Index not only highlights the state’s many specific problems, but the FPI can also be used as a roadmap to reverse these troubling trends. There is no single “silver-bullet” solution to the Ocean State’s many shortcomings. As it took hundreds of pieces of misguided legislation and regulation over recent decades to sink the state into a hole, it will take dozens, if not hundreds, of strategically aligned positive steps to pull us out.

Clearly, a new strategic policy direction is required for our state — a direction that the political class and civil society can largely agree upon. The high levels of taxation and regulation demanded by the state’s budget have led to the subsequent negative impacts on the business community and on family finances, as illustrated by Rhode Island’s out-migration losses. Yet the state’s political leaders continue to adhere to a misguided fealty to a budget that actually harms the very people they are sworn to serve. Indeed the state budget itself, and the policies that support it, could be considered to be the enemy of the people.

The FPI shows us the way. The major lesson of the original 2016 RI FPI report is that strong families lead to a strong economy, and vice versa. The clear, empirical evidence from a detailed analysis of reams of data from government and publicly available private sources confirms that a focus on pro-family outcomes, via policies that promote work and marriage, can lead to improved economic outcomes for the entire state.

By looking to improve each of the 60 FPI indexes, one at a time, the Ocean State can begin to turn its ship around. This focus will be at the core of the Center’s ongoing public policy advocacy and will be the primary mission of the recently formed RI Families Coalition.

 

For decades, Rhode Island state politicians have practiced allegiance to a budget that has failed its people; a budget that requires unhealthy levels of taxation and regulation. This, as opposed to the allegiance they are sworn to uphold to the people of Rhode Island.

Massive Deficits: The State’s Budget is the Enemy of the People

BACKGROUND:

Should the hopes, dreams, and aspirations of Rhode Island families be limited by an arbitrary, politically driven budget number at the bottom of a spreadsheet? Unfortunately, our state is now suffering the consequences of such an approach, dragged-down by the progressive-left’s big-spending agenda; as projected economic growth has not materialized, leaving the state with massive budget deficits.

Failure of Budget-Centric Apporoach. Yet, for decades, state politicians have practiced allegiance to a budget that has failed its people; a budget that requires unhealthy levels of taxation and regulation. This, as opposed to the allegiance they are sworn to uphold to the people of Rhode Island.

Despite the false hopes expressed by lawmakers based solely on a reduced unemployment rate, on broader measures, in 2016 the Ocean State suffered the worst business climate and the 48th rank in family prosperity in the nation. Furthermore, Rhode Island was the only state in New England to see its labor force decline in size in recent years, as hundreds of thousands of people have chosen to leave our state since 2004. This is not a recovery. The RI Center for Freedom & Prosperity maintains that the high levels of taxation and over-regulation imposed for the sake of the state budget are the primary culprit in causing this stagnant performance.

It should now be plainly clear that this progressive-left, big-spending, budget-centric approach is not working. Indeed, the state budget itself, could be considered the enemy of the people! Put another way, overspending by a government that primarily seeks to perpetuate and grow itself, actually works against the best-interests of the very people it is supposed to be serving. Instead of seeking to grow prosperity, government seeks to grow itself. This approach must end.

A battle of visions. The progressive-left vision measures compassion and progress by how many people are enrolled in — and become dependent upon — public assistance programs; and by how much money is thrown at a perceived problem. Conversely, the Center believes that Rhode Island families can improve their quality of life and increase their level self-sufficiency only if more and better businesses are free to create more and better jobs and if families can keep more of their hard-earned incomes!

To realize this latter vision — and for true prosperity to be realized — the size of government via budget spending must be cut, so that taxes can be decreased.

What is really in the best interests of Rhode Island families? Is dependence on an unreliable and inefficient government what people hope and strive for? Or, should it be the American dream; where promised freedoms and opportunities abound so that we can increase our own own personal wealth and quality of life?

Deficits: An Opportunity to Reverse Course. Rhode Island’s budget spending rises every year — far beyond the rate of inflation and population growth — as lawmakers are resistant to spending cuts, even when such cuts could lead to increased prosperity for its residents!  If phasing out the car tax and cutting the state sales tax to 3.0% would keep more money in the pockets of residents … and could create thousands of new jobs and better opportunities at the same time … why should any budget number stand in the way?

The state budget should be constructed to reflect the opportunities we want for our people; it should not be the tool to restrict those opportunities.

The nearly $134 million budget deficit presents a new opportunity for our state and a test for lawmakers to determine if they will be wise enough to begin to reverse this budget-centric trend, and move toward an approach that will free its families and business to become more self-sufficient. To bridge the gap, our Center urges lawmakers NOT to continue to seek to extract new revenues from the people they represent; instead we ask them to appreciate our state’s recent history lessons and cut spending instead.

BUDGET CUTS: Over $250 million previously identified

The RI Center for Freedom & Prosperity recommends that, to balance the 2018 state budget, spending cut must be implemented. Further, now is the exact time to consider even greater spending reductions so that bold, pro-growth tax cuts can benefit every Rhode Island resident and business. Only budget and tax cuts can spur the economic growth.

The obvious question then becomes: Where can be spending be trimmed without adversely affecting our people? Over recent years, the Center has put forth many specific ideas that can easily account for hundreds of millions of reductions to unnecessary spending items.

If there’s a will, there’s a way. In its 2014 Spotlight on $pending report, as well as in its 2013 recommendations on how to pay for sales tax reduction and in its 2015 PayGo policy brief on how to pay for bridge and road repairs without imposing new tolls, the Center has suggested many items for reduction or elimination.  Some of the numbers or programs may have changed in the years since, but the following examples (based on the former budget value) give an indication of what can be done:

  • $116 million in handouts. Legislative and Community grants; Workforce Board and Training grants; subsidies to film, television, motion pictures, and the arts industries; historic tax credits, etc.
  • $44 million in other corporate welfare. WAVE and other Brookings Institution-inspired economic development corporate subsidies and tax credits.
  • Up to $80 million in Medicaid and Social Services waste and fraud.
  • $22 million in government operations savings. Facilities management; Convention Center (net $15M annual operating loss; level fund this loss-leader while state arranges to sell), Corrections and inmate-related expenses, excessive administrative expenses, etc.
  • $30 million in personnel savings. Executive and Legislative branch staff, excessive overtime pay, non-essential departments and offices; etc.
  • $6 million in government overreach. UHIP contributions, pre-K and full-day kindergarten, Commerce Corp. administration, etc.
  • $8 million for shutdown of HealthSource RI. If the U.S. Congress passes its AHCA legislation, there will no longer be a need for a state-based exchange.

Additionally, newly adopted or proposed spending programs can also be reduced or eliminated.

  • Up to $35 million for free college tuition.
Does Rhode Island want a transparent healthcare market that relies on the free-enterprise system and that enables providers and patients to craft and choose their own plans, driving down the price for consumers? How will the new federal healthcare law change they way Rhode Islanders receive care?

Is Rhode Island Prepared to Best Serve its Citizens Under the Shifting Federal Healthcare Landscape?

Click here for the press release

Center Calls on Lawmakers to Responsibly Consider AHCA Implications for RI; Desist with Fear-Mongering 

FOR IMMEDIATE RELEASE: May 9, 2017

AHCA: Center Calls on RI Lawmakers to be Responsibly Proactive vs. Reactive Fear-Mongering
Recommends Public Process to Consider State Options

Providence, RI – Healthcare is among the most personal and important issues any family may ever deal with. Similarly, evaluating the realities of the shifting federal and state health care landscapes is among the most important tasks our state lawmakers may ever consider.

Instead of irresponsibly spreading false fears about the proposed federal health care reforms, the Rhode Island Center for Freedom & Prosperity today calls on lawmakers to work together to establish a responsible process to evaluate – in between legislative sessions – the many options states may soon be empowered to make if some version of the American Health Care Act (AHCA) were to become law this summer.

“It is a gross public disservice for Rhode Island’s Governor and Congressional delegation to falsely claim that thousands of people will lose health coverage or may die in the streets due the new law,” warns Mike Stenhouse, CEO for the Center. “We need their leadership right now to ensure that serious discussions about serious issues will be systematically conducted by serious people. Enough of the shameful and unproductive partisan talking-points.”

In a policy brief it also issued today, the Center poses a number of question and vital decisions that Ocean State policymakers may soon be empowered to make to serve the best interests of the people of Rhode Island.

-What do we do with HealthSource RI?
-How should RI evolve its Medicaid program under a per capita cap? Should it apply a Medicaid block-grant waiver?
-Should RI opt for a federal waiver to set up its own high-risk pool?
-Should RI reduce mandated coverages and allow cross-state sales?
-Should work requirements, cost-sharing arrangements, or time limits be placed on Medicaid benefits?

“Assuming that some version of the AHCA will not become law until after our legislative session is closed for the year, it is important that Rhode Island political leaders put in place some kind of process so that before the 2018 session we can properly, fully, and publicly consider the new law and the many decisions we will have to make as a state,” concluded Stenhouse, who has participated in numerous national conference calls with some of the U.S. Congressman who actually wrote the House AHCA bill and with local health care experts such as Gary Alexander, former health and humans services director for the states of Rhode Island and Pennsylvania.

The policy brief also discusses myths about the AHCA, as well as some of its intended goals and features dealing with Medicaid and pre-existing conditions.

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OVERVIEW

If the final federal healthcare law that eventually emerges from Washington, D.C. is similar to the version that passed the House of Representatives in early May of 2017, Rhode Island lawmakers will find themselves in the middle of largely reshaped federal and state healthcare landscape. Soon they may be faced with multiple important questions; and they will also realize that they will be newly empowered to make state-specific decisions for the people of Rhode Island.

  • What do we do with HealthSourceRI?
  • Should RI opt for a Medicaid “block grant”?
  • How should RI evolve its Medicaid program under a per capita cap?
  • Should RI opt for a waiver to set up its own high-risk pool?
  • Should RI reduce mandated-coverage and allow cross-state sales?
  • Should work-requirements, cost-sharing arrangements, or time-limits be placed on Medicaid benefits for some populations?

Should Rhode Island have a transparent healthcare insurance market that relies on the free-enterprise system and that enables providers and patients to craft and choose their own plans, driving down the price for consumers? Or should we continue with a government-controlled market that mandates what individuals, employers and insurers must provide and buy, with continually increasing premiums and deductibles?

Are Rhode Island lawmakers and bureaucrats prepared to honestly analyze the new law and make decisions based on the best interest of our residents? Or will political ideology prevail, with high-cost, limited-option insurance plans as the result?

Given that any official signing into law of the new federal healthcare law will likely occur after Rhode Island’s 2017 legislative session is closed, the Center encourages state leaders to establish a firm process for the summer or fall, whereby these and other questions, as well as potential solutions that may be offered from all perspectives, can be publicly and fully debated.

BACKGROUND

Now that the U.S. House of Representatives has passed its American Health Care Act (AHCA), it is likely that another major federal healthcare reform will eventually be signed into law out of Washington, D.C.  and in state capitols.

The question for Rhode Island, and for all states, is whether or not we are ready to take advantage of the new federal healthcare  law to best serve the healthcare interests of our residents.

The answer depends on what we think really is in people’s best interests.

Do we believe that the goal should be to maximize enrollment Medicaid and limited other government-mandated and subsidized insurance programs? Or should the goal be to offer as many Ocean Staters as possible, the most options as possible via affordable and higher-quality private insurance.

Should Rhode Island measure compassion simply by measuring the number of people enrolled in government insurance? Since the passage of ObamaCare, many people have raised legitimate concerns that simply having an insurance card does not always translate in health care accesss. For example, with its Medicaid expansion straining doctors’ schedules, many of the most medically needy have experienced unbearable wait times, sub-standard care, or simply suffered mismanagement by the government.

ObamaCare was premised on the government-centric model; it distorted the insurance market with artificial product mandates and forced purchasing; and states had little control or flexibility over their insurance markets.

Conversely, the Republicans’ American Health Care Act is premised more on the patient-centric model. It seeks to restore many market forces and normalize insurance offerings from which consumers will be free to choose. Under the AHCA, states may have significant latitude even as they will have to make multiple decisions when it comes determining how healthcare insurance will be offered within their borders.

The Center believes that Rhode Islanders should be able to choose their own plans and doctors, not those mandated by the federal or state government.

The differences between the ObamaCare and the AHCA models represent a significant shift in thinking, thinking that may be difficult for our government-focused political class to get its head around. But new thinking must take place if our state is to maximize benefits for Rhode Islanders. Rhode Island officials must not stick their heads in the sand and wish it wasn’t so; they must honestly seek to understand the new federal law and openly and rigorously discuss the options soon to be available to them.

Given that the final AHCA bill from Washington will not be signed into law until after Rhode Island’s 2017 legislative session has closed, it is appropriate to ask if Rhode Island lawmakers have put in place a process to evaluate and make these vital decisions.

The Center is concerned that, without such an open and transparent process, Rhode Island will either rush into decisions when its legislature reconvenes in 2018 or will make decisions behind closed doors, with a focus  only on the same government-controlled options that created insurance-market disruptions in the first place.

The Center years ago accurately predicted the UHIP debacle and warned about the lack of coverage, rising premiums, exploding Medicaid rolls, and high budgetary-cost problems that have subsequently been caused by ObamaCare and its HealthSourceIRI state exchange. We now strongly urges state lawmakers to put in place an open and systematic process that can evaluate the new federal healthcare law and how Rhode Island should best respond. A process that appropriately debates all points-of-view, dispenses with fear-mongering myths, and that puts the interests of Rhode Islanders ahead of any philosophical agenda.

The American Health Care Act – Looking Ahead

While the final AHCA legislation will likely include significant modifications from the current House version, a number of principles and features are not likely to change.

Our RI Center for Freedom & Prosperity has participated in multiple recent conference calls with national healthcare experts and with the actual lawmakers who have written the AHCA legislation and has conferred with local health and human services experts. Our Center has a clear understanding of the goals of the AHCA, what major components will be included and will not be included, and how to make it work best for Rhode Islanders.

ObamaCare is not sustainable. While more Americans are technically covered, the costs have been enormous across the board. Insurance buyers are facing rapidly increasing premiums and deductibles; federal and state taxpayers are paying more and more into an ever-deepening money-pit; insurers are losing money and are rapidly dropping out of the system, leaving consumers with far too few choices. The AHCA reform would stop forcing Americans to buy insurance they can’t afford to use. In Rhode Island enrollment has exploded in costly and low-quality government Medicaid as compared with those purchasing private insurance. The AHCA seeks to provide more cost-efficient options for more Americans to acquire quality insurance that best fits their individual needs.

AHCA Myths and Facts. First, it is important to dispel some of the myths that opponents of AHCA healthcare reform are attempting to propagate, if we are to hold legitimate statewide debate:

  1. MYTH: Tens of thousands of Rhode Islanders will lose their Medicaid. FACT: No one will be “thrown off” Medicaid. Medicaid will continue to serve as a safety-net for America’s most vulnerable populations. Despite public claims by politicians that tens of thousands of Rhode Islanders will lose their Medicaid coverage, under the AHCA, no American will be thrown off Medicaid. While the expanded eligibility funding currently offered by ObamaCare will eventually be returned to pre-Obamacare levels for new enrollees, anyone enrolled in Medicaid at the time the AHCA is signed into law will be grandfathered-in and will remain on Medicaid as long as they continue to meet their original eligibility requirements. The AHCA expects overall Medicaid rolls to be reduced over-time through attrition – as people naturally increase their incomes or otherwise acquire private insurance from their employer as they re-enter the workforce – or by other means.
  1. MYTH: The AHCA will cause premiums to spike. FACT: The mechanisms in the AHCS will lead to lower premiums. Unlike ObamaCare, which sought only to fund high-priced insurance and did little if anything to address actual core healthcare or health insurance costs, the final AHCA implementation (including future administrative regulatory fixes) will implement a number of market-based provisions that will create downward pressure on insurance premiums. By reducing the number of required-coverage mandates, by increasing competition via cross-state sales, and by not forcing insurance buyers to pay for other people’s insurance, market forces will naturally bend the cost-curve down.
  1. MYTH: Those with “pre-existing conditions” will be denied access to insurance. FACT: the AHCA takes great pains to ensure coverage for this population. The final negotiated piece to the House version of the AHCA guarantees that those with pre-existing conditions will not be denied coverage. In fact, the invisible risk-sharing program in the AHCA functions like a pre-exisiting condition “protection fund”, allowing this population to purchase insurance at roughly the same rates as those that are healthy. How such high-risk individuals would pay for insurance is discussed later in this paper.

The AHCA, in reality. The AHCA seeks to responsibly transition away from government insurance by providing more US citizens with higher-quality, less-costly private insurance options.

This will be achieved through elimination of many federal healthcare mandates on states, individuals, and employers, in addition to a new program of tax-credits and/or payroll deductions that will give Rhode Islanders more choices and multiple new options when it comes to purchasing an insurance plan that best fits their needs. This as opposed to the one-sized-fits-all government mandated coverage that American are now forced to purchase.

Under the new federal plan, gone would be many of the top-down federal intrusions into state markets that have led to the implosion of ObamaCare’s government-mandated insurance strategy. Soon to be extinct will be the onerous individual and employer mandates and penalties, many of the costly taxes, inefficient state and federal exchanges, and unlimited expansion of Medicaid.

Without the oppressive ObamaCare employer mandate, companies will no longer be at financial risk if they increase the size of their workforce beyond the 50-employee threshold and will no longer have to be concerned about limiting weekly worker hours to 30 hours or less. Elimination of this mandate alone should increase employment and incomes across America.

Maintained, will be the age-26 insurance provision for young adults on their parents’ policies, and limits on lifetime out-of-pocket expenses.

Healthy, young people should be able to purchase policies at greatly reduced premium levels, as they will no longer be asked to partially pay for policies for more elderly and unhealthy patients.

Instead of complex Obamacare health-insurance subsidies, calculated via state or federal health insurance exchanges, to be applied to reduce premiums for limited insurance-policy options … a more simplified tax-credit system will be favored by the AHCA so that patients can freely shop in a larger, open market.

Also under consideration is a “no additional premium insurance” provision that may be inserted during Senate deliberations of the AHCA. Under this provision, insurance companies will be required to offer policies, reduced in scope as they may be, with premiums that do not exceed the tax-credit levels being offered under the new law. This way, individuals can essentially be guaranteed to be able to purchase private insurance, if they so choose, with the premiums paid for exclusively with federal tax credits.

Medicaid. “The new law will mean significant changes and a long-term reduction of funds to Rhode Island’s health care industry, including Medicaid,” said Gary D. Alexander, adjunct scholar to the Center, who formerly held the positions of Secretary of Health and Human services for Rhode Island and Secretary of Human Services for Pennsylvania. “The state should quickly analyze the impact and begin planning how to change course and move to a more of a market-based system that ensures greater budget certainty, higher care quality, affordable access, and true transparency.”

It is also likely that health savings account (HSA) plans will become more of the standard. HSA plans normally feature lower monthly premiums – that cover major medical problems – but requires individuals to be more involved in seeking-out value providers for elective and other diagnostic care, paid for with previously saved, typically tax-exempt HSA funds.

Prescription drug prices are being looked at separately and are not part of the AHCA discussion.

As the Center warned months ago, state lawmakers must find a way to be smarter with state and federal funds. Under the new federal approach, the state-run exchange will likely become a relic of the past. It also appears that some of the very same market-based approaches the Center has recommended in the past will now be in synch with federal law and must be considered as part of Rhode Island’s healthcare future.

Preserving States’ Rights Increases States’ Choices. The AHCA properly recognizes the rights of states to choose to act independently and free of federal mandates on issues that are not constitutionally granted to the federal government.  Under the AHCA, each state will be given significant flexibility to choose the insurance method it determines best serves the needs of its residents. This feature will allow states to innovate, much as Rhode Island did in 2008 when it pioneered the Medicaid “block-grant” waiver; and such as Maine has initiated with its newly implemented high-risk-pool model.

Similar waivers and other options will be presented to states, each of which is designed to lower premiums and increase access.

State Choices Under the New Federal Healthcare Landscape?

With the passage of the House Republicans’ plan to repeal and replace ObamaCare, the RI Center for Freedom & Prosperity  today calls on state lawmakers to proactively consider how they will consider the options for our state. While the final passage of the AHCA in Washington, D.C. will likely occur too late to fashion the state’s 2018 fiscal budget, it would be a disservice to Rhode Islanders if their lawmakers were to wait until January 2018 to begin public debate on such an important issue.

This new flexibility will allow states to design insurance frameworks and new Medicaid offerings that are right for their unique populations, providing superior care and lowering costs for patients.

The Center suggests that the state – perhaps by forming a joint-legislative commission or a gubernatorially created task-force, or even via a planned special fall legislative session – should proactively and immediately put in place some process to begin consideration of the multiple choices Rhode Island will soon have to make.

Among the likely decisions to be considered by state lawmakers:

  • Medicaid Per Capita Cap? How should the state evolve its Medicaid program to deliver the best possible care at the lowest cost? Under the AHCA, the unlimited 90% federal funding rate for continued state Medicaid expansion will revert to pre-Obamacare federal reimbursement levels for new enrollees. Therefore, will have to decide how many state funds they want to devote to a single program as a percentage of its state budget going forward.
  • Medicaid block grant? Should the state apply for a new version of a Medicaid block grant? By agreeing to free itself from many ObamaCare mandates, Rhode Island could decide how best to spend a fixed amount of federal funds in anyway it chooses, so that it can provide Medicaid services to whomever it defines as the most vulnerable of our state’s residents.
  • Medicaid “work” or “cost sharing” requirements? In addition to re-considering Medicaid eligibility requirements, states may choose to consider whether or not to design a “work requirement” for able-bodied recipients. Medicaid was originally designed as a safety-net to provide government insurance for low-income single parents, for low-income elderly, and for disabled Americans. It was not designed to become permanent and free insurance for those who are able to work and provide for themselves. Under the ObamaCare Medicaid expansion, many non-disabled childless adults of working-age qualified for Medicaid for the fist time. In many states, these expanded Medicaid populations seem to be prioritized over the most-needy, creating increased burdens on state and federal taxpayers and decreasing care for the truly needy. Similarly, should working Rhode Islanders on Medicaid, who earn above a specified income level, share in some healthcare costs – such as co-pays – or be subject to some kind of Medicaid time limit?
  • Shut-down HealthSourceRI to save state operational funds? With federal subsidies calculated and dispersed by state and federal exchanges soon to end, and with no future need for government-mandated insurance policies to be purchased, there soon will be no further need for the state to assume the burden of operating its HealthSourceRI ObamaCare state exchange. When and how HealthSourceRI is phased-out or shut-down is another decision Rhode Island lawmakers will have to consider.
  • Reduced insurance mandates? In order to provide a wider array of options for lower-cost insurance, Rhode Island should consider whether it should reduce the number of state-mandated coverages. Prior to ObamaCare Rhode Island imposed the highest number of insurance mandates in the nation, which artificially drove-up premium costs because individuals had to pay for coverage they would never use. With reduced mandates, insurers will have greater flexibility to craft a variety of plans and pricing levels that meet the demands of would-be enrollees. Also, fewer mandates would likely mean that more insurance companies might choose to compete in Rhode Island, in turn providing a broader array of insurance offerings for patients.
  • Cross-state sales? If there eventually is a related federal provision, should Rhode Island allow out-of-state insurers to compete in our state? One of the reasons auto, home, and life insurance premium rates are relatively low is the national competition naturally created by an open-market. Conversely, Rhode Island and many other states restrict competition and innovation by mandating one-size-fits-all policies, making them unprofitable for insurers. This tends to create monopolies or oligopolies that drive up premium rates.
  • Medicaid accountss? If coverage mandates are reduced, and if cross-state health insurance sales are allowed, states could decide to provide even greater flexibility for patients by creating a Medicaid account system. Such a system would allow individuals who qualify for Medicaid to take the value of the premium for this government insurance and allow them to apply that sum towards the purchase of private insurance of their choosing.
  • High-risk pools and/or invisible risk-sharing for those with pre-existing conditions? While those with pre-existing conditions will still be guaranteed coverage under the AHCA, the new federal healthcare law would allow states to apply for waivers from current federal insurance regulations that increase premiums and, instead, place these individuals into separate high-risk pools. Or the could run an “invisible” risk-sharing program that keeps everyone in the same market, similar to a successful program that was recently implemented in the State of Maine, which reduced premiums for all age groups and kept premiums low for those with pre-existing conditions. Under a completely free-market system, these individuals, who because of their pre-conditions are considered a higher risk, would naturally incur higher insurance premiums. However, depending on the final version of the AHCA, the federal government may implement two risk-sharing programs designed to reduce premiums. The first would provide subsidies to reduce premiums to a more affordable level for those states that opt to establish such a pool. A second measure under the AHCA, aimed at stabilizing premiums and reducing risk for this group and for their insurers, is to further subsidize insurance companies directly for actual healthcare costs above a specified level for those in the pool. As an added protection for those who are currently insured with pre-existing conditions, in states that opt for this waiver, individuals who maintain continuous insurance would not be subject to increased premiums in the high-risk pool.
  • New Models of Care? As the Center suggested many years ago, should Rhode Island begin a discussion on new models of care that drive transparency, allow consumers to shop for services, and provide direct patient access to providers without a middle man? For example, models like Direct Primary Care (DPC) are gaining legal momentum at the state level as a viable means for physicians to provide primary care to patients at a lower cost than traditional practice models or traditional insurance. Already, over a dozen states have enacted laws that recognize the DPC model and have made it easier for physicians to operate within it.

In conclusion, those on the Left will have to learn to cope with the new reality that driving people towards government-provided or government-mandated insurance will no longer be funded by the federal government and that not as many people will be enrolled in Medicaid.

Conservatives, on the other hand, must learn to cope with the reality the new AHCA law still positions federal healthcare as a form of an “entitlement” program, and that taxpayer-funded subsidies, in many different forms, are a political reality and likely to increase over time.

Now is the time for Rhode Island to begin careful planning for each of these eventualities and to lead the nation when it comes to devising the most innovative plans that will provide quality, patient-centered healthcare at the lowest possible cost. As Thomas Paine once wrote, “government should cost the least and do the most.”

Why should Rhode Islanders expect anything less from their elected officials?

Wine & Liquor Sales Increased 21.4% After Sales Tax Cut

Report: Government Data Proof of Retail Boom for 3.0% Sales Tax Concept

Wine & Spirits Increased 21.4% After Sales Tax Cut

Providence, RI – Imagine the parking lots of Rhode Island retailers filled with cars with Massachusetts license plates. Actual data from the State demonstrates that this is possible. The same level of economic stimulus – as projected by the Center by cutting the state’s overall sales tax – actually occurred when the same tax was cut on liquor and wine. This, according to a report issued today by the nonpartisan Rhode Island Center for Freedom & Prosperity, based on RI Department of Revenue data.

Among the report’s findings, in the years after the 7% retail sales tax on wine and spirits was repealed (to 0.0%) in 2013:

  • Wine and spirits sales saw a boost of 21.4% over the first two years (during the same time period, all statewide retail sales increased by just 8.3%).
  • The Center’s economic modeling tool projected a comparable 21.2% positive statewide retail impact if the sales tax were to be cut to 3.0%.
  • Current corporate-subsidy schemes claim just dozens or hundreds of new jobs at a budget cost averaging about $80,000/job;
    • Conversely, a 3.0% sales tax would create thousands of good new jobs at a 10X lower rate, or only $7,000/job per job.
  • Over $3,100,000,000 in retail sales growth would result from a statewide sales tax cut to 3%.

“After the wine and spirits sales tax was cut, my store’s overall sales have increased dramatically, in part fueled by more Rhode Island shoppers staying home, instead of crossing into Massachusetts,” said Jan Malik, former state Representative from Warren and current liquor store owner.

“As opposed to the anti-business, job-killing legislation being advanced by the progressive-left, our Center’s pro-jobs, pro-family sales tax plan would keep more money in the pockets of businesses and families and would create new opportunities for Rhode Islanders to improve their quality of life,” explained Mike Stenhouse, CEO for the Center.

Representative Robert Nardolillo III (R, D28, Coventry) has submitted legislation (H6105) that would reduce the state’s sales tax rate to 3.0%, from its current 7.0% level.

Representative Jared Nunes (D, D25, Coventry/W.Warwick). with support of Majority Leader, Joseph Shekarchi, has introduced legislation (H6127) for a special commission to study how the state can responsibly reduce the sales tax to 3.0%

Also, as the Center documented in a prior policy brief, “stealth triple sales tax burden” currently imposed on Rhode Islanders and how the sales tax is being used by lawmakers to stealthily take more money out of the pockets of Rhode Islanders in three unfair way ways.

In March, the Center published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

Marijuana Legalization: Constitutional Crisis and Increased Costs and Legal Jeopardy for Employers?

Click here to see our previous marijuana statement

Click here to see testimony from CEO Stenhouse

April 5, 2017. Providence, RI — Concerned about the lack of serious debate about the societal impact of legislation that would legalize recreational marijuana use, the RI Center for Freedom & Prosperity today published a policy brief that underscores the high risks that employers would face without adequate statutory protections. The brief follows a statement last month by the Center about the potential negative impact on family culture.

“If we want to increase opportunities for meaningful work for Rhode Island families, we need every employer and every job to remain in our state,” warned Mike Stenhouse, CEO for the Center. “Imposing new legal risks on the business community, without proper evaluation and accommodation, would be an irresponsible act that would further harm our already last-place business climate.”

With hearings expected on the legislation next week, according to the policy brief, the legalization of recreational marijuana would create a constitutional crisis, whereby increased usage rates, could create major legal jeopardy and new costs for employers:

  • Legal jeopardy and costs for employers
  • Workplace safety
  • Increased drug testing costs for employers
  • Increased workers’ compensation costs and liabilities
  • Difficulty in identifying, recruiting, hiring, and maintaining drug-free employees
  • Loss of employee productivity
  • Increased costs to taxpayers for social services programs for those who become or remain unemployed for marijuana related reasons

“I have professionally dealt with employees who are concerned about their own personal safety when their co-workers are stoned in the workplace,” said Michael Cerullo, an Adjunct Scholar to the Center on the issue of substance abuse. “Increased usage of marijuana will invariably lead to decreased safety and productivity in manufacturing and other work environments, and will create legal problems for employers who seek to maintain a drug-free workplace.”

Cerullo is founder of What’s the Rush RI and is one of the state’s leading activists against marijuana legalization until a more thorough examination of the data from other states can be made. He is a private practice psychotherapist. Cerullo has evaluated and treated hundreds of adolescent and emerging adults involved with DCYF, the Family Court and justice system and with residential rehab programs.

As a more prudent approach, and in order to better understand these and other issues, the Center and Mr. Cerullo support the concept of a legislative study commission to properly vet data from other states and to evaluate the potential impacts of legalization across the board. The Center recommends a two-year commission study and reporting period so as to allow for even more research to be compiled. This approach is in keeping with the prestigious Rand Corporation’s view that it will not be until 2020 that we will fully see what changes take place in use, revenue, black market activity, big marijuana industry behavior and in downstream treatment, public health and safety trends.

The fact that the sales tax is regressive (disproportionately affecting poorer people) is uncontroversial, but reform is also a question of tax fairness.

3.0% Sales Tax, a Matter of Fairness

Stating his rationale for eliminating the state’s car tax (as his campaign for reelection puffed toward the election day finish line), Rhode Island Speaker of the House Nicholas Mattiello (D, Cranston) told reporters that the tax is “regressive” and “unfair.” The same can be said of the sales tax, which the RI Center for Freedom & Prosperity believes should be reduced to a rate of 3.0%.

That the sales tax is regressive — meaning that it disproportionately affects poorer people — is so uncontroversial that the point needn’t be argued, so here are four reasons the sales tax is unfair, too.

The Sales Tax Was Implemented for Specific Purposes… and Failed

When the General Assembly imposed the sales tax on Rhode Islanders for the first time in 1947 and revised its rationale in 1956 and 1988, legislators emphasized an “obligation to grant pay increases for teachers” and a dire need to provide more state money to “the several cities and towns now confronted with financial crisis.”

As Rhode Islanders continue to face high levels of taxation with no reduction in teachers’ claim to deserve higher pay or municipalities’ insistence that their finances are threatened without help from the state (even with the looming pension calamity having gone dormant for the time being), nobody can plausibly claim that the sales tax solved the problem that it was implemented to solve.

To the extent that the state’s tax burden drives Rhode Islanders out of the state to shop, to live, and to start businesses, thus harming the revenue of the state and its municipalities, the tax is actually undermining the very purpose for which it was implemented.

The 7% Rate Was Supposed to Be Temporary

Faced with a banking crisis in the early ’90s, the people of Rhode Island accepted a higher rate on the sales tax. As the New York Times reported in 1992, “To provide [the Rhode Island Depositors Economic Protection Corporation (Depco)] with money to repay the bonds, the state raised the sales tax to 7 percent from 6 percent, with six-tenths of 1 percent, or $31.8 million in 1992, earmarked for Depco.”

The expectation was that the increase was temporary, but that turned out to be yet another broken promise from the state government.

The Rate Is Supposed to Go Down with Internet Sales

Similarly, when legislators wanted to sell voters on the idea of taxing online sales, as through Amazon.com, they put a provision into the law to drop the 7% rate down to 6.5% “upon passage of any federal law that authorizes states to require remote sellers to collect and remit sales and use taxes.” Well, the federal government never passed such a law, but over the years, the state has cracked down on online retailers in a variety of ways.

Just this year, as part of her budget proposal, Democrat Governor Gina Raimondo has suggested a Remote Seller Sales Tax Collection program that would increase the reporting requirements on online retailers and pressure Rhode Islanders to pay the use tax. Her budget assumes $34,715,462 from the tightening of the taxation screws. Since the budget’s release, Amazon has stated that it will voluntarily begin collecting sales taxes for Rhode Island.

No elected officials have even hinted that the sales tax rate might go down accordingly.

Use Tax Crackdown Could Double-Tax Purchases

One of the measures the state recently implemented in order to impose a de facto online sales tax was, essentially, a minimum tax for purchases the government assumes people make online or out of state.

Under state law, Rhode Islanders are supposed to pay a “use tax” equaling the sales tax they avoided on any purchase from a non–Rhode Island retailer. As part of the fiscal 2015 budget, the state began requiring people filing their income tax returns to either catalog their out-of-state and online purchases and pay the appropriate use tax or to pay a minimum of $8 use tax for every $10,000 in income. In effect, that assumes that a household with income of $50,000 spent around $571 on purchases without paying a sales tax. (Naturally, the state set the minimum to go up with inflation every year.)

At the time this minimum use tax was implemented, the state budget experts estimated that the new requirement would raise about $2.2 million in revenue.

The combination of this minimum use tax with the new online retail program and Amazon sales tax collections means that many Rhode Islanders will surely be double-taxed on their online purchases. The budget does not change the calculation of the minimum, meaning that it still assumes online purchases, so any taxpayers who do not begin keeping records of all purchases — online, in Rhode Island, and elsewhere — and sorting through their receipts while filling out their income tax forms will by default pay a use tax on Internet purchases that were already taxed.

Indeed, the state seems to be relying on this double-taxation, because the budget documents do not change the use tax law (to account for online sales tax collections). Moreover, use tax estimates for the upcoming year do not appear to have been reduced as they would have to be if Rhode Islanders were to begin itemizing online purchases.

Rage Against the Unfair Sales Tax

In summary, Rhode Island’s sales tax — the highest in New England and 30th out of 50 in the country — was first implemented to solve a problem that it did not solve, has been increased with the promise of reductions that never happened, and is leading to a stealth double tax.

Not only is it unfair and regressive, but the Ocean State’s high sales tax confiscates resources Rhode Islanders could better spend elsewhere and acts as a drag on the economy and a job killer. The least the state can do is to drop the rate to 3.0%, which ultimately wouldn’t lose the government much more revenue than it expects to gain from online sales and would cost much less than the car tax elimination.

Click HERE To Expand To See The Press Release

FOR IMMEDIATE RELEASE: March 29, 2017

Rep. Nardolillo Submits Bill to Reduce Sales Tax to 3.0%
As a Matter of Fairness, Rate Reductions Owed to Rhode Islanders

Providence, RI – The State of Rhode Island has broken its promises and unfairly has denied its residents a cut to its nationally high state sales tax rate. Representative Robert Nardolillo III (R, D28, Coventry) is attempting to exceed those promises by submitting legislation (H6105) that would reduce the rate to 3.0%, from its current 7.0% level.

In a new policy brief published today, the nonpartisan RI Center for Freedom & Prosperity discusses a “stealth triple sales tax burden” currently imposed on Rhode Islanders:

-Rhode Island’s state sales tax, among the highest rates in the nation, was originally implemented for a specific municipal purpose, while subsequent increases were supposed to be temporary. In both cases, the regressive tax has remained a costly burden on Ocean State families and businesses.
-The sales tax rate was supposed to be reduced following the implementation of a national Internet sales tax. New Internet taxes are now being collected in the state, yet there is no discussion of rate reductions.
-A minimum “use tax” was recently imposed on Rhode Islanders who file a state an income tax return. This estimated tax was designed to account for purchases made online or out of state. Again, with Internet taxes now being directly collected, there is no discussion to reduce or eliminate this “use tax.”

In summary, the sales tax is being used by lawmakers to stealthily take more money out of the pockets of Rhode Islanders in three unfair way ways … and breaking promises made to the people.

Last week the Center published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

The complete analysis, which can be found on the Center’s website, includes discussion of:

-Why bold tax reform is needed
-Budget reconciliation options
-State spending chart
-General findings
-Two tables with multiple and detailed projections of private employment impact and of various “state” and “municipal” revenues

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax; or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

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Congress

Center Responds to Governor Raimondo’s Federal Healthcare News Conference

FOR IMMEDIATE RELEASE: March 23, 2017
Governor Does Not Understand Goal of Federal Reforms

Fear-mongering not helpful to legitimate debate

Providence, RI – Mike Stenhouse, CEO for the nonpartisan Rhode Island Center for Freedom & Prosperity issued a statement, following a news conference today by Governor Gina Raimondo about her concerns about the proposed federal American Healthcare Act (AHA), which is being advanced in Washington, D.C.

“In conference calls over the past few weeks, I have had the opportunity to speak directly with members of the US Congress who are crafting the new federal healthcare reforms. Unfortunately, the Governor and others on the left do not understand the goals of these reforms; they see government-run Medicaid as the end-all, be-all when it comes to health insurance coverage; and they are spreading unnecessary fears about the proposed federal reforms. Even though Medicaid is a taxpayer-costly, low-quality insurance option, no one will be thrown off or defunded from the system.

The American Healthcare Act seeks to responsibly provide more US citizens with higher-quality, more cost-effective private insurance. This will be achieved through a generous new program of tax-credits and/or payroll deductions that will give Rhode Islanders more choices and multiple new options when it comes to purchasing an insurance plan that best fits their needs. This as opposed to the one-sized-fits-all government mandated coverage that American are now forced to purchase.

Further, the state block-grant aspect of the AHA, will give the Governor, other lawmakers, and health care officials tremendous new flexibility to innovate when it comes to utilizing federal funds in a manner that best suits our state.”

Sales Tax Reform

A 3.0% Sales Tax: A Superior Economic Stimulus Than Car Tax Repeal or Free College Tuition

FOR IMMEDIATE RELEASE: March 20, 2017

Plans by Speaker and Governor Could Cost Jobs and Municipal Revenue Losses
Sales Tax Cuts Would Increase Jobs and Could Pay for Car Tax Reforms

Providence, RI – The nonpartisan Rhode Island Center for Freedom & Prosperity today published detailed economic modeling projections and analysis, demonstrating that a cut in the state sales tax to 3.0% would produce far more statewide and municipal economic benefit than would repeal of the car tax, as proposed by the Speaker of the House, or would free college tuition, as proposed by the Governor.

Among the takeaways of the analysis, which projected the impact of both the car tax and sales tax reform ideas, shows that a 3.0% sales tax would:

  • Keep significantly more money in the pockets of Rhode Island families and businesses ($585 million vs $215 million)
  • Produce thousands of new jobs, as opposed to potential job losses with car tax or tuition spending
  • Require lower budget cuts and/or corresponding tax increases than would car tax reform
  • Create a major revenue windfall for municipalities that could go a long way toward funding local “self” phase-out of the car tax, where car tax repeal (depending on how it is paid for) could result in lower municipal revenues
  • Would allow every Rhode Island family to save for any college education

“We appreciate that the Speaker and Governor both want see more Rhode Island families keep more of their hard-earned money. However, if we want to maximize the positive economic benefit for the people, we must conduct the proper due diligence and research to determine which course of action is most beneficial,” advised Mike Stenhouse, CEO for the Center. “Today, the Center offers well-researched projections from a credible economic modeling tool to add a third concept into this important debate. Any objective analysis of this data shows that sales tax cuts are the superior approach.”

The complete analysis, which can be found on the Center’s website, includes discussion of:

  • Why bold tax reform is needed
  • Budget reconciliation options
  • State spending chart
  • General findings
  • Two tables with multiple and detailed projections of private employment impact and of various “state” and “municipal” revenues

In 2012 and 2013, the Center proposed two major options for sales tax reform, as the most effective and highest value method for creating jobs and boosting the state’s stagnant economy: full repeal of the sales tax; or cutting the sales tax to 3.0%. Links to this expansive past research can be found at RIFreedom.org/SalesTax.

3.0% Sales Tax: Superior Reform than Car Tax Repeal or Free College Tuition?

Car Tax, Free Tuition Programs Could Mean Loss of Jobs and Lower Municipal Revenues

3.0% Sales Tax Adds Thousands of Jobs, Increases Local Revenues

OVERVIEW:

As taxpayers continue to be asked to fund generous corporate subsidy programs, lawmakers are now dueling over two new spending ideas – reimbursing localities to phase-out the car tax and public funding for free college tuition – each of which would likely further raise taxes and fees on Rhode Islanders.

But would these programs make Rhode Island a better state? Or would the more innovative and bold policy concept of cutting the state sales tax help families become more self-sufficient?

Neither the Speaker nor the Governor have offered research or economic projections on the impact of their respective ideas. The Center, conversely, offers well-researched projections from a credible economic modeling tool.

As will be clearly demonstrated, the Center’s previously proposed 3.0% sales tax reform would help working Rhode Islanders and businesses much more than would car tax repeal or free college tuition. A cut in the state sales tax rate to 3.0% from 7% would :

  • Keep significantly more money in the pockets of Rhode Island families and businesses
  • Produce thousands of new jobs, as opposed to potential job losses with car tax or tuition spending
  • Require lower budget cuts and/or corresponding tax increases than would car tax reform
  • Create a major revenue windfall for municipalities that could go a long way toward funding local “self” phase-out of the car tax, where car tax repeal could result in lower municipal revenues
  • Would allow every Rhode Island family to save for any college education

Funding? Elimination of corporate welfare subsidies and free college tuition funds could go a long way towards paying for the $82.3 million required to dynamically fund a 3.0% sales tax … vs the $229.7 required to dynamically fund car tax repeal.

Regressive? While many view the current car tax play as regressive, a revenue-neutral car tax repeal plan would be further so in that low-income individuals who do not own a car, or who own a car valued under existing exemption thresholds, would be indirectly funding property tax relief for wealthier people. A 3.0% sales tax would disproportionately help low-income families. Similarly the college tuition and corporate welfare plans require lower income families and businesses to pay for benefits that will go, in part, to the more wealthy.

Fairness? The car tax plan would inequitably distribute money to localities, and would reward those cities and towns that imposed excessively high car tax rates.

Business Climate Benefit? The sales tax is a tax on business. Collectively businesses pay almost half-of all sales taxes. A 3.0% sales tax would reduce such costs across the board and improve our state’s last place business climate ranking. Car tax repeal would only impact those businesses that have company owned vehicles.

Municipal Dependency? The car tax repeal plan would make municipalities even more dependent on state aid via its associated reimbursement mechanism. Depending how the policy is implemented, municipalities may simply increase regular property taxes to compensate for the car tax no longer collected, avoiding the state tax cap. A 3.0% sales tax would give new revenues to cities and towns to able to phase-out the car tax on their own, especially when in combination with other “tools”  that could free them from state mandates and regulations.

Ease of Implementation? The car tax plan would require negotiation with low car tax municipalities, given the varying rates and exemption limits set by each municipality. Sales tax reform could be easily and uniformly implemented across the board.

BACKGROUND: Why bold reform is required

Rhode Island is losing the competition to retain and attract families who want to make our state their home-of-choice, where they can work hard, earn a respectable living, and support their families. But many Rhode Islanders feel left out. They are fed up with the status quo of ever-increased spending on special interest causes … and the perpetually high taxes and red-tape that are driving others out of town.

Our state’s stagnant population growth will likely result in the loss of one of our two precious U.S. Congressional seats after the 2020 census. This net-migration problem can be attributed to concerns about present and future financial security. Factors that contribute to this problem are obvious: In 2016 Rhode Island ranked as the worst state business climate in America and ranked just 48th on the national Family Prosperity Index (FPI) and on the Jobs & Opportunity Index (JOI)

People want restored hope that government is working for them and to feel that they have not been forgotten. To accomplish this, a bold reform idea is clearly required.

The RI Center for Freedom & Prosperity agrees with the Speaker of the House and with the Governor that Rhode Island families should keep more of their hard-earned income via tax reductions and that a college education should be more affordable. Car and property taxes, as well as college tuitions, are indeed high; they are an irritating or unbearable cost for most families. However, directly confronting those issues, may not be the most prosperous path forward.

The Center also believes that the state needs to  relieve burdens on employers, increase  our state’s consumer and tax base, and create more opportunities for meaningful work for those who want to improve their quality of life.

As such, not all tax and spending programs are created equally, as adjustments to certain taxes and fees will have greater impact on job creation and can be more of an economic stimulus than others. Given our state’s dismal national status, it is vital that Rhode Island takes bold and well-researched reforms to maximize the impact of every budget dollar.

Years ago the Center researched and proposed major cuts to – even repeal of – the state’s nationally high,  job-killing sales tax. A complex economic modeling tool that has been used by dozens of states and major municipalities, STAMP (State Tax Analysis Modeling Program), showed that for the Ocean State, sales tax reform, among all taxes and fees considered, would produce the greatest and most beneficial dynamic* economic impact.

However, neither the House leadership at that time, nor the special commission that was created to study sales tax cuts, were interested in re-configuring the state’s budget to accommodate for the major economic growth projected by STAMP.

But now today, with House leadership and the Governor apparently appreciating that tax and fee cuts would keep more money in the pockets of Ocean Staters, the Center suggests, once again, that reform to the sales tax would produce more benefit to families and businesses than would the Speaker’s or the Governor’s plan.

Not only would sales tax reform keep more money in the pockets of every Rhode Island family, it would reduce costs for every Rhode Island business. It would also spur increased consumerism by both in-state and out-of-state shoppers, and; most importantly … it would create thousands of good, new job opportunities.

The Center further researched which level of cut to the sales tax would produce the most benefit. It was clearly demonstrated that a cut in the sales tax to 3.0% would produce the best value for taxpayers and for the budget by creating a high number of jobs at the lowest budget-cost per job created.

*Based on 2014 figures from STAMP (State Tax Analysis & Modeling Program) developed by the Beacon Hill Institute. Dynamic scoring impact takes into account the “ripple” impact of tax reforms by projecting increases or decreases to other tax revenues and fees.

BUDGET RECONCILIATION METHODS

There are two primary methods to accommodate the budget to account for the impact of any tax cut or new spending program:

  1. Revenue Neutral” approach by raising other taxes to make up for the anticipated lost revenues or higher spending
  2. Spending Cuts” to other budget items

Or, some combination of the two.

To date, neither the Speaker nor the Governor have identified how they will reconcile, or pay, for their respectively proposed programs.

Revenue Neutrality?

The Center maintains that Rhode Island spends too much taxpayer money for the state to quickly break-out of its economic stagnation. No matter how lawmakers slice and dice the many taxes and fees that are imposed on our citizenry, our high level of spending – and corresponding need for high taxation – creates a permanent negative drag on our state economy.

RI State Budget Versus Inflation and Population Growth and Personal Income Growth (2001 Baseline)

In the past two decades, Rhode Island’s spending trajectory has risen far faster than inflation, population growth, or personal income would otherwise dictate.

By comparison, New Hampshire, which consistently ranks near the top of most national rankings, spends almost 50% less per person than does Rhode Island.

In order for any public policy reform to achieve maximum economic impact, it is necessary that budget cuts – without offsetting tax increases – are used to pay for the reform. However, the reality and history of public policy in the Ocean State tells us that lawmakers will likely consider only “revenue-neutral” scenarios, where revenue losses due to cuts in one tax are offset by increased fees or taxes elsewhere. While this practice would minimize or – as we will show – potentially eliminate any economic benefits in some cases, a revenue-neutral policy is seen as the likely political solution … as economically-unsound as it may be.

To be clear, the Center contends, for a state struggling as much as is Rhode Island, that revenue neutrality should not be the goal of bold tax reform … and that both tax and budget cuts are required if we want to generate maximum stimulus to our state’s stagnant economy.

Found Revenues? It has also been suggested by both the Speaker and the Governor, that “newly found” revenues from debt restructuring, casinos, or other sources, might be used to fund their new proposed spending. It is the Center’s contention that such new revenues should be applied to help pay for sales tax cuts.

In order to set the outside parameters for economic impact, the Center created two tables? Each compares the long-term dynamic* scoring of the two tax reform concepts for Rhode Island: 1) phasing-out the car tax; and 2) phasing-down the sales tax to 3.0%:

  • TABLE-1 assumes “revenue neutrality,” with offsetting tax increases, to pay for each policy option
  • TABLE-2 assumes “spending cuts” to pay for each policy option

Any actual implementation of either of these programs would likely fall within these parameters.

Because the governor’s free college tuition plan and the state’s current corporate welfare strategy technically do not qualify as tax reforms, we are not able to effectively run them through the STAMP model. Their economic impact, based on the findings and theory of the model, is assumed and referred to separately.

FINDINGS

Taxpayer Savings and Increased Purchasing Power: The Speaker’s car tax plan would directly save taxpayers $215 million in property taxes, while a 3.0% sales tax would put $585 million back into the pockets of Rhode Island families and businesses, and eventually back into the economy. However, the net dynamic impact would be far less – or even entirely eliminated – if other taxes and fees are hiked under a revenue-neutral approach.

A 3.0% Sales Tax is is the most beneficial reform in terms of jobs, economic stimulus, business climate, and budget value … regardless of whether a revenue-neutral approach is adopted or not.

Car Tax Phase-Out Could Lead to LOSS of Jobs.  Car tax reform, on its own, is a minor economic stimulus at best, as it does little to improve the state’s dismal business climate.

A revenue-neutral car tax phase-out would necessarily increase statewide taxes and fees (relatively) – even while most car owners would pay lower local property taxes – and would lead to a net loss of jobs. This is because the negative economic impact of increased state-level taxes is significantly greater than the positive impact of lowered local taxes.

If a “spending cut” approach is taken, car tax repeal could spur the creation of a limited number of new statewide jobs, but at a significantly lower level, and with far more required budget cuts, than a 3.0% sales tax with spending cuts.

Free-College Tuition Could Also Lead to a LOSS of Jobs. Similarly, using the same STAMP theory, providing free-tuition  would also increase statewide taxes and fees (relatively) – even while some in-state families would have more disposable income due to lowered fees – and would lead to a net loss of jobs. Again, this is because the negative economic impact of broadly increased state-level taxes is greater than the positive impact of more disposable income for a more narrow base.

Under a ‘spending cut’ approach, free college tuition, as car tax repeal, might produce a limited number of new statewide jobs, but at a significantly higher cost per job, than a 3.0% sales tax with spending cuts.

Rhode Island’s Current Corporate Tax-Credit Economic Development Strategy is highly inefficient as it creates relatively few jobs at an extremely high cost per job to taxpayers. Using the same STAMP theory, the negative impact of requiring increased statewide taxes to pay for the credits is presumed to be greater than the positive impact of a few hundred more people working.

Further, this targeted ‘advanced industry’ approach does little if anything to improve the overall business climate, which is necessary if organic entrepreneurial growth is to occur on its own.

EXPLANATION OF S.T.A.M.P. PROJECTIONS (see Tables 1 & 2)

ECONOMIC EFFECTS

Private Employment (or Jobs). Both the Speaker and Governor claim that “jobs” is their top economic priority. Sales tax reform produces significantly more job-growth, regardless of revenue-neutrality, while car tax reform and, as explained above, free-college tuition could lead to a loss of jobs under a revenue-neutral approach.

Investment. The increase/decrease in capital invested in the state due to tax reforms. As with employment, sales tax reform always produces a positive investment, while revenue-neutral car tax and free-tuition programs could produce a negative impact and a reduced investment.

STATE REVENUES:

Sales Tax Revenue: Under a ‘revenue neutral car tax repeal scenario, to partially fund the state’s $215 million in “Transfer” (reimbursements) to municipalities, and in order set the worst-case economic impact parameter, we assume an increase in “Sales tax” revenues. However, because a sales tax hike will negatively impact commerce and the economy, it will dynamically result in less sales tax revenue than the straight-line (or static) calculation, therefore the “Policy target” for sales tax increases must be higher than the needed revenues.

Conversely, under either budget reconciliation method for a 3.0% sales tax phase-down plan, the straight-line (static) calculated sales tax “Policy target” revenue losses are greater than the actual (dynamic) “Sales tax” revenue loss, because the sales tax cuts will spur more sales tax transactions.

Under a ‘spending cut’ approach, car tax reform would produce a very limited increase in “Sales tax” revenues, because of greater disposable income across the state.

The difference between the static and dynamic sales tax revenue projections is portrayed as the “Dynamic difference”

Personal Income Tax Revenue: Similarly, increased “Personal income tax” revenues are also assumed to fund the rest of  revenue-neutral car tax plan. However, because negative dynamic impact will lessen such revenues, a higher income tax “Policy target” is required.

Under the 3.0% sales tax plan, because of the thousands of new jobs created, “Personal income tax” revenues are projected to dynamically rise by between $304 million to $468 million, regardless of which budget reconciliation process is utilized.

Corporate/Business Tax . As with sales and income taxes, the negative statewide impact of a  revenue-neutral car tax plan that includes other tax hikes, may produce lower “Corporate/business taxes”. Under all scenarios, a 3.0% sales tax will always produce positive and significantly higher “Corporate/business tax” revenues.

Cigarette Tax, Other Taxes & Other Sources.  As with the personal and income taxes, the negative statewide impact of a  revenue-neutral car tax plan, may reduce revenues from “Cigarette taxes”, “Other taxes” and “Other sources”. Under all scenarios, a 3.0% sales tax will produce positive and significantly more revenues in these areas.

MUNICIPAL REVENUES: Additional municipal benefits from sales tax cuts will result from the increased retail and overall economic activity .

Business Property Tax. The stimulus of sales tax cuts would see many existing businesses expand and many other new business established. Cities and towns will likely see an expansion of its local commercial property tax base and will result in increased “Business property tax” revenues. While municipalities must comply with a 4% annual tax-levy cap, this larger tax-base will allow localities to reduce property taxes in other areas, potentially including the car tax.

Conversely, under a revenue-neutral car tax repeal plan, municipalities could actually see reduced municipal “Business property tax” revenues, due to the more potent impact of statewide sales and income tax hikes as compared with local property tax cuts.

In fact, the potential new municipal revenues from a 3.0% sales tax – on their own – could fund over half of the cost of statewide car tax repeal.

Municipal Sales Tax, Other taxes and Other sources of revenues:  Similarly, under a car tax repeal plan, municipal revenues in other areas could increase or decrease in limited amounts. Conversely, under any 3.0% sales tax scenario, these revenue areas would increase, potentially in a significant way.

The Providence Journal and RI progressives are doing a disservice to Rhode Islanders by advancing a biased perspective on the healthcare reform debate.

The “Real” News About Healthcare Reform

The Providence Journal and Rhode Island progressives are doing a disservice to the people of our state by advancing a biased and non-realistic perspective on the federal healthcare reform debate.

There are few issues that are more personal or important than planning for the care that can preserve the health of ourselves and our families. But what governmental approach best helps us accomplish this?

Currently, our state is following the federal Obamacare approach of seeking to insure more people with government-run Medicaid or with a one-size-fits-all government-mandated private insurance plan. This approach is in a death-spiral. In Rhode Island and across the nation, premiums and deductibles have risen beyond affordability; costs to taxpayers have exploded; the supply of doctors, insurance plan choices, and the availability of actual care are all plummeting.This is an unsustainable trajectory.

The U.S. Congress proposed reforms take an opposite approach. The goal of the reforms is NOT to force more people to buy or enroll in expensive government-approved insurance. Rather, the goal is to offer citizens more and lower-priced private insurance options and to let them choose whether or not they want to have health insurance … and what type and level of insurance they believe is best for them.

Compassion should not be measured by how many people are covered by inefficient government insurance or by how much money we throw at the problem. This is the biased, government-centric lens through which the left and the ProJo view the proposed reforms.

As Congress recognizes, there are a number of patient-centric reforms that could significantly reduce premium and out-of-pocket costs, even while expanding consumer choice and improving the quality of care: reducing mandates for services that patients do not want or will never need; allowing inter-state health insurance competition; allowing group purchasing; or encouraging expanded Health Savings Account (HSA) and other payroll deduction programs.

Medicaid, is perhaps the most contentious and misunderstood issue. Medicaid insurance is not necessarily good insurance and it does not always lead to good health care. With many doctors leaving the program because of its stingy payouts, and with enrollment levels continually on the rise, many Medicaid patients cannot get an appointment with a doctor in a timely manner, and when they do, suffer from substandard care.

Again, the new Medicaid reforms seek to reverse these trends. What will not happen is that people will be thrown off the system. What will happen is that Medicaid will be returned towards its original mission of providing health insurance for the neediest Americans; poor children, pregnant women, and the disabled elderly. In recent decades, and especially under Obamacare, eligibility standards have been dramatically expanded to include single and working individuals and families far above the poverty line. Medicaid was not originally intended to be an entitlement for able-bodied, working Americans.

All the while, taxpayers have been asked to bear the burden of this increasingly expensive, expansive, and ineffective Medicaid system.

First, the new reforms would cut the rate of enrollment in Medicaid by tightening the eligibility requirements to serve only the neediest among us. Under these new guidelines, while no one will be thrown off, it is through attrition, as people’s financial circumstances improve, that many will naturally leave the system.

Second, Medicaid reform will protect taxpaying families and businesses from never-ending increases; in effect, putting the system on a much-need budget. This will save money for federal and state taxpayers.

Third, the reforms will give states unparalleled flexibility, via a capped, block-grant type arrangement. With limited funds, based on population, states will be free to innovate and to decide how federal funds can best serve its low-income and disabled populations. For example, not only could enrollment parameters be customized by state, but states may be able to opt for a work-requirement or a co-pay for those above poverty levels. There is even some discussion of a voucher, whereby recipients could have public Medicaid funds instead follow them to a private insurer of their choice. Rhode Island, the trail-blazer when it comes to Medicaid block-grants, should embrace this option.

In summary, the concept of a government-run health insurance market has failed. Rhode Islanders will be better served when they have expanded options to purchase or enroll in one of the many new plans that will best meet their needs at the lowest possible price, and at quality levels.

Levels of money and government-mandated insurance enrollment are not the only standards by which the media, the public, and lawmakers should judge the federal reforms about to be implemented. Freedom of choice, affordability, and quality of care should be the primary metrics.