$692 million increase in spending over past two years
Center demands fulfillment of promise to cut sales tax
With no major reforms and by capitulating to the progressive agenda, the proposed 2018 state budget will become even more destructive for the people of Rhode Island. Despite disingenuous claims that no broad-based taxes were imposed and that spending has been cut, Ocean Staters will once again bear increased burdens to pay for the pet-projects of political leaders and advocacy extremists.
Conspicuously absent from public discussion is that the 2018 budget contains $32.2 million in new Internet taxes ($15 million from Amazon alone); this in addition to millions more in new cigarette taxes, all of which will be paid for by Rhode Island families and businesses. These tax increases outpace the proposed car tax cuts, as the proposed budget will increase state general fund spending by over $67 million.
“We simply spend too much. The taxes we all must pay to support this bloated budget will continue to drag down our state. Unlike the town of East Greenwich, which bravely cut actual year-to-year spending in its recent budget so as to avoid new tax hikes, this state budget will once again include tax increases and higher spending,” commented Mike Stenhouse, CEO for the Center. “Working class Rhode Islanders do not feel that heralding economic progress because of continued handouts to wealthy special interests will do anything to enhance their ability to move up the income ladder.”
The Center also maintains that state politicians are breaking a promise made to the people of Rhode Island to cut the sales tax rate. In addition to paying its already high 7.0% brick-and-mortar sales tax rate, Rhode Islanders in recent years have also been subjected to a new “use’ tax on our tax forms; a way to pay taxes on presumed out-of-state and internet purchases. Legislation was passed a few years ago in Rhode Island, whereby if the federal government imposed an internet sales tax mandate, our state would cut its sales tax rate to 6.5%. Now, with the state of Rhode Island aggressively collecting internet sales taxes from resident families and businesses, to the tune of over $30 million per year, it is time for the State to honor the spirit of the law and fulfill its promise to reduce the sales tax rate.
In a state already saddled with the 50th ranked business climate, 48th on the Jobs & Opportunity Index (JOI), and 45th on the Family Prosperity Index (FPI), when combined with other legislation expected to pass this session, the 2018 budget has no game-changing tax or regulatory reforms that would substantially improve Rhode Island’s weakened competitive status. In fact, it appears as if the progressive left will achieve at least three of its four job-killing “fair shot” agenda items, which will likely make these dismal national rankings even worse.
Rhode Island spends taxpayer money at a significantly higher rate — at $9,276 per capita, compared with $8,604 for Massachusetts and, more starkly, $4,097 for New Hampshire. These two states ranks significantly higher than Rhode Island on the above cited national indexes. Further, on net, high spending and high taxes have driven out of state 11 towns’ worth of population, or over 80,000 Rhode Islanders, over the past 12 years.
There are also other deceptions put forth by political leaders. In what is become an annual pattern, a few strategies for apparent misinformation are coming into focus. First, the annual June baseline budget is adopted at a lower level, then revised upward during the mid-year budget conferences — a stealth cover for spending increases. Just this year, the 2017 budget is on track to be revised upward by $265 million, largely under the radar. That is on top of the increase of the originally enacted 2017 budget of $434 million over actual 2016 spending, for a whopping 8% increase in two stages.
Rhode Islanders can have no confidence that the same process will not be followed with the budget for fiscal year 2018, especially with gimmicks like $25 million in “undistributed savings.”
The second disingenuous claim is that certain spending programs have been “cut”, where in reality there is more spending in that area (e.g., as compared to the Governor’s original free-tuition program); or that cuts have been “restored” to politically sensitive constituents, such as Medicaid payments to hospitals and other providers. In fact, spending in these areas continues to rise. No cuts ever occurred. Instead, some of the governor’s proposed increases have been reduced to smaller increases.
Third, is a process referred to as “scooping.” Scooping is potentially a deceptive practice as it moves off-budget funding from specific state agencies or quasi-publics (e.g., $5 million from the Narragansett Bay Commission) into the general fund. Over time, these agencies may seek to recoup lost funds by shifting the burden to municipal taxpayers or other sources via increased fees (e.g., sewer taxes).
As with all budgets and legislative sessions that the Center has analyzed since 2012, there are more negative provisions than positive provisions:
On the negative side, with spending on the rise once again: increased Internet and cigarette taxes, increased minimum wage mandates that depress job growth, increased renewable energy mandates that increase energy costs, a likely paid-time-off mandate that further deteriorates the business climate, free college tuition handouts, enshrined healthcare mandates that restrict patient choices, scooping of vehicle registration fees, more state government workers, and the continued budget for targeted corporate welfare incentives.
On the positive side are: limited car tax cuts, decreased corporate welfare spending, and prioritized pro-family spending programs such as free RIPTA passes for low-income individuals and increases spending for Davies Career and Technical High School, both of which would be unambiguously positive if the budget were itself flat or going down.