RI’s State and Local Tax Burden Still an F

Rhode Island’s state and local tax burden is still the sixth worst in the nation, according to the Tax Foundation’s updated ranking.  In fiscal year 2010, the latest year for available data, residents of the Ocean State once again paid 10.9% of their income to state and local governments.

As was true last year, using 2009 data, only Connecticut performed worse in New England, by the Tax Foundation’s measure.  Rhode Island’s state and local tax burden will therefore receive another F grade when the RI Center for Freedom & Prosperity updates its Report Card on Rhode Island Competitiveness early in 2013.

In 2010, Rhode Islanders paid $29 less per capita in state and local taxes to other states ($1,309), but $19 more to their own ($3,318).  The Tax Foundation added those sums together and calculated the result as a percentage of the average per capita income of $42,628, which represented an increase of only $155 from the prior year, still well below the 2008 average of $44,345.  More telling, perhaps, is that this increase was much smaller than the norm of the last three decades.

Member of Center’s Task Force to be Panelist at Brown Univ “Pensions in Peril” Forum

Providence — A member of the RI Center for Freedom & Prosperity’s special pension task force will serve as a panelist at the “Pensions in Peril” forum today, October 25 (Thursday afternoon), sponsored by the Taubman Center for Public Policy at Brown University. The forum will feature national and local experts about how municipalities are dealing with the fiscal time bomb of unfunded pension liabilities.

Eileen Norcross, a senior research fellow with the Mercatus Center at George Mason University and lead researcher on the State and Local Policy Project, was the first national expert to raise alarms about public pension accounting in RI localities in 2011, arguing that municipalities are vastly under-estimating the true scope of their unfunded pension liabilities. Norcross co-authored a report that calculated municipal pension liabilities under various discount rate assumptions.

The Mercatus Center report, which received significant local and national attention, indirectly challenges the more rosy pension assumptions put forth by some local officials in RI, including co-panelist, Mayor Scott Avedisian of Warwick.

The forum, which will take place from 4:00 pm to 6:00 pm at the Salomon Center for Teaching 001 off the main green at Brown University, is free and open to the public and media.

For more information about the Center’s pension task force and Eileen Norcross, click here.

The Rhode Island Center for Freedom and Prosperity, a non-partisan public policy think tank, is the state’s leading free-enterprise advocacy organization. With a credo that freedom is indispensable to citizens’ well-being and prosperity, the Center’s mission is to stimulate a rigorous exchange of ideas with the goal of restoring competitiveness to Rhode Island through the advancement of market-based reform solutions.

Media Contact:

Taubman Center: 401.863.2201

Rhode Island Employment Snapshot, September 2012

Rhode Island’s unemployment rate fell another two tenths of a point in September, to 10.5%, still second only to Nevada.  More notable, though, is that the Ocean State led the nation in actual employment increase, and that the results for the country as a whole have rightly raised eye-brows. Not seasonally adjusted, September typically sees a decrease in employment, so this months results were not only historic, but unusual.

The first chart below shows Rhode Island’s trends in labor force (employed and looking for work) and employment since the beginning of the recession in January 2007.  The second chart shows the labor force and employment pictures for Rhode Island, Massachusetts, and Connecticut as each state’s current percentage of January 2007.

Rhode Island Labor Force and Employment, January 2007 to September 2012

RI, MA, and CT Labor Force and Employment, September 2012 Percentage of January 2007

“Get Government Out of the Way”: a free-market solution for the RI economy

Related Links: Oct 11 Press Conference Event & CEO Stenhouse Extended Remarks, Prosperity Agenda for RI,
Podcast: ALEC's Jonathan Williams discusses with Dan Yorke on 630WPRO
Video: Mike Stenhouse remarks at Press Conference

Adherence to  Free-Enterprise Principles can Revive the Ocean State’s Economy

The state of Rhode Island requires significant public policy reform to unleash a private-sector economic engine fueled by the creativity, investment, and energy of businesses and individuals. What is not needed are more of the same subjective and politicized tactics that benefit chosen business sectors, favored political constituencies, limited geographical regions, or specific business ventures.

Rhode Island does not have to reinvent the wheel. Three proven steps are required to embark on a new path to improve Rhode Island’s economic fortunes:

1. Embrace the free-enterprise system as the means to restore prosperity

2. Follow and learn from successful economic policies implemented in other states

3. Design and implement public policy reforms reflective of the above, applied evenly and universally

In seeking to provide assistance to too many people, in caving to special-interest-group concerns, and by doling out special favors to the well connected, the state of Rhode Island has created dozens upon dozens of legislative barriers to success. These barriers have restricted economic and individual opportunities and incentives, resulting in the worst business climate in the country, loss of out-migrating taxpayers, a slew of Fs and Ds on the state’s Competitiveness Report Card, and the most dismal jobs outlook of any state in the nation. Prosperity can only be achieved if those barriers are systematically torn down and we move decisively on a new economic path.

That proven economic path is the free-enterprise system. Even President Obama calls it the ‘genius of America’, yet Rhode Island has sharply departed from its principles. Free-market concepts must be re-embraced and recognized as the economic engine that has proven to be the most effective machine ever devised to raise people out of economic misery and into a higher standard of living. This means our state must enact policies that lower taxes, reduce regulations, and cut spending. The benefit will be increased economic activity, more jobs, and positive state-to-state net migration. In contrast, government redistribution polices have failed the very citizens they intend to help.

Before we undertake the task of implementing specific policy reforms that dramatically roll back laws that hinder economic growth, a long-term commitment to economic freedom must be established. Removing certain barriers while erecting others will get us nowhere. Adherence to free-market principles is required. But, as a state, we must also be willing to work through our political and cultural differences.

Contrary to our popular notion of polarized politics, the free-enterprise system is not a political philosophy. It is a well-delineated economic philosophy predicated on a culture of success. As a people, we must overcome our disdain of the successful and resist the temptation for government to serve as referee in tilting calls to favor groups it perceives to be in need. This is not the proper role of our uniquely American form of government; it interferes with the efficient mechanics of the free-market system and it provides disincentives to achieve and prosper.

We must accept that a paycheck is better than a welfare check and recognize that a growing economy that provides job opportunities is far more desirable than a stagnant economy that breeds dependency on government services and impedes upward mobility. We cannot have it both ways. We must also understand that it is a morally preferable that free people should strive to be self-sufficient and maintain the rewards of their own hard work. Government policies should create incentives for the pursuit of individual happiness, not hinder that pursuit.

The main strategy to unleash Rhode Island’s economic revival should be to learn from and follow the successful policy reforms enacted in other states; namely, creating an attractive business climate, with free competition, so that all laborers, entrepreneurs, and businesses can have more opportunities to work, to innovate, to grow, and to prosper.

Our RI Center for Freedom & Prosperity has researched and developed an initial set of policy reforms that are consistent with these goals – our Prosperity Agenda for Rhode Island: a set of taxpayer-friendly, worker-friendly, and business-friendly reforms that reduce burdens on employers and provide more freedom of choice for individuals; proven reforms, successfully implemented in other states, that will start to move the Ocean State down a new path towards economic growth.


Cranston Herald: Study shows free-market enterprise is path to prosperity in RI

Stenhouse Remarks – Press Conference 10/11/12

October 11, 2012 Press Conference: Mike Stenhouse, Revised & Extended Remarks

“Get Government Out of the Way” Solution

Good morning. Today, the RI Center for Freedom & Prosperity recommends a free-market, get-government-out-of-the-way approach to restore Rhode Island’s struggling economy.

Rhode Islanders want to be in control of their own lives. They want to know that if they educate themselves and work hard that they can be in charge of their own futures. They don’t want someone else telling what they need to do.

The Secretary of States publishes the RI Government Owner’s Manual, under the premise that we the people “own” our government. But who’s really in charge? Many Ocean Staters feel like the government is running THEIR lives, both personally and professionally.

Rhode Island has the worst business climate in the nation because we have one of the most burdensome tax and regulatory environments, leaving families with fewer opportunities and options to pursue a productive life of their own choosing.

More and more it seems that restrictive laws and government programs are running our lives and creating obstacles to prosperity.

Bad laws created this bad environment. So … it should not be all difficult to determine what approach we should take: If we want a good economy, bad laws must be repealed.

Our Center’s Report Card on RI Competitiveness documents dozens of areas where our state receives failing or poor grades because of laws that restrict opportunity or economic activity. Each of these poor grades represents a barrier to success. If we want a more competitive economy, we must tear down those intrusive barriers.

Our Center’s General Assembly Freedom Index for 2012 demonstrates how this past legislative session – only made matters worse. If we want an improving economy, we must roll back destructive legislation.

Our recent study on out-migration to bordering counties in MA and CT, are evidence that the onerous state and local tax burden in RI is driving taxpayers out of state.

Out Migration from RI

High Taxes in RI are forcing taxpayers to flee to MA and CT

The Chart above shows that Rhode Islanders who want to work and stay close to their families in Rhode Island, but who can’t afford to pay the taxes we impose on them, simply have to move a few miles over the border. And they are moving … in droves … taking their wealth and their kids with them. Taking our state’s future with them.

If we want an economy that attracts people to our state, we must stop over-taxing them.

Most Rhode Islanders want job security, more disposable income, and more quality time with their families.

I think of Marshall D’Ambrosio, owner of Legion Bowl and Billiards, our gracious host here today. Because of Rhode Island’s poor economy, and in order to survive, he has had to continually invest and risk his time and money in order re-invent his longtime family business here in Cranston.

How many ballgames and other family activities has he had to miss over the years, working into the wee hours because of the bad business climate in this state?

That bad business climate means other families and businesses have less disposable income … less income to go on a family vacation, to organize a business event, or even for a family outing at the local bowling alley.

It’s time to get real. It’s time to understand that the recent high-profile forums and reports, seeking solutions for our economy, are just window dressings that forestall action on the critical problems we must face head on as a state … that they seriously miss the mark.

The bad news is that no-one in the political class seems to want to address this problem. Think about what has transpired this year: the two most powerful officials in our state, the Governor and the Speaker of the House, have both indicated that there’s not much to do but to wait until the national economy picks up … this is not an economic strategy. And, unfortunately, they followed their own advice … they did nothing.

The General Assembly seems concerned only with balancing a budget … a budget is not economic policy.

More recently, highly publicized forums and special reports have generated much debate about how to boost the state’s failing economy: from commerce czars, to public-private partnerships, to what the private sector can do, to more creative marketing of the state, to reorganizing government departments, to grappling with questions like “who’s in charge”. Yet all of these approaches miss the critical mark. The political class does not get it.

But the good news is that citizens seem to get it … In fact, at one of those recent forums, 83% of the participants surveyed believe government to be the obstacle to economic development. Let me repeat … 83% believe government is the obstacle!

The solution must be to get government out of the way … to tear down the barriers to success … this solution is called the free-enterprise system. In the national debate last week, even President Obama call free-enterprise the ‘genius of America’; yet Rhode Island has severely departed from its principles.

Free-enterprise works, and has always worked; but Rhode Island’s economy is anything but free.

Free-markets are about individuals trying to better their own lives by working, innovating, and investing in business enterprises. Unlike the approaches currently under debate in our state, there should be no central authority dictating how or what workers and entrepreneurs need to do. There need be no over-arching strategy that restricts people’s choices. Laborers, investors, and business leaders should be largely free to work and prosper as they deem best.

This is what stimulates growth. This is what increases jobs. This is what creates wealth and grows the economic pie.

If we want a prosperous economy we must re-embrace the free-enterprise system.

Prosperity means that barriers to success must systematically be torn down.

Prosperity means that tax rates must be lowered.

Prosperity means that regulations on workers and businesses must be rolled back.

Prosperity means that we must trust more in each individual’s capacity to thrive and become self-sufficient.

Prosperity means that our state government must do less, and it must spend less.

Prosperity means that government must get out of the way. Adherence to a philosophy that seeks to subsidize politically sensitive constituencies – perceived to be in need – must be reversed.

If we want a productive economy we must build an opportunity environment that encourages people to be self-sufficient.

Similarly, revenue neutral approaches will not be enough to stimulate the rapid growth we need. Taxes and spending must be cut.

In fact, as we can see in the chart below, Rhode Island’s spending over the past 10 years has far outpaced inflation and its population growth … real spending cuts must be made, and can be made. Over this period, our state, in trying to be compassionate, has simply tried to help too many people … and it is slowly killing our economy.

RI spending has outpaced inflation and population rates

RI spending has outpaced inflation and population rates

If we want to create new wealth, we must abandon the redistribution of wealth approach.

If we survived at the spending levels of ten years ago, we can survive on them today.

Rhode Island can learn from the experiences of other states; some states richer, some states poorer; some polices working, some policies failing. It was also part of the genius of America that states would serve as laboratories of freedom, so that policy concepts of all kinds could be tried and tested.

Regarding economic policy, many state tests have been studied. We have ample data and evidence; and it is now well-known what approaches have been successful in other states.

If we want a bigger economic pie in RI … we need a new recipe.

We don’t need hundreds of pages of reports, or days upon days of public meetings to figure out what we need to do. In fact, our Get Gov’t Out of the Way public policy approach comprises 3 basic steps, that fits on a single page (in your packets).

In this regard, last month, our Center released a Prosperity Agenda for Rhode Island, a set of initial policy recommendations that will indeed roll back bad laws; an agenda that will tear down some of the significant barriers to success in our state; a pro-worker, pro-business agenda that can begin to restore freedom and prosperity for our citizens.

An example of one of the more compelling reforms is our Zero.Zero Sales Tax recommendation. Which of these two sets of numbers is better: [75-38-400] or [68-0-5000]?

Spending on a sales tax cut is better than 39-Studios spending

Well, let’s take a closer look … for less than the 75 million dollars the state thought was a good investment in 38 Studios chasing after just 400 jobs, Rhode Island could spend 68 million dollars in the first year of a phase out the sales tax towards 0.0%, which would create 5000 jobs each year for four years!

Yet, no one in the political class wants to debate this concept. Are we not in need of a game-changing solution?

We have evidence of a prosperous 0%-sales-tax state right up the road from us in New Hampshire; further, sales taxes reform is one of the handful of proven policies that states should consider, according to our guest speaker.

In fact, a national expert on state fiscal policy is here with us today, Jonathan Williams. In his book, Rich States, Poor States, he documents which states are doing well and which are not; which approaches to prosperity are succeeding and which approaches have failed.

To add his perspective is a man who has spoken to audiences across the country and has been quoted, seen or heard on numerous national media outlets. May I introduce to you the Director of the Center for State Fiscal Reform and the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council, Mr. Jonathan Williams …

October 11 Press Conference

Press Conference: October 11, 2012; 11:45 AM; Legion Bowl and Billiards; 661 Park Ave, Cranston, RI

“Get Government Out of the Way”

A Free-Market Approach to Improve RI’s Economy

Mike Stenhouse & Jonathan Williams at the Center's press conference

Media Information

The RI Center for Freedom & Prosperity will present a free-market public policy approach as the most effective approach to improve the Ocean State’s economy. A national expert from Washington, D.C. on state fiscal policy will also provide his perspective. Rhode Island has sharply deviated from free-enterprise principles … and is suffering the consequences. A rigorous public debate must ensue before the state embarks on any new path. In recent weeks, public forums and special reports have already generated much debate about commerce czars, public-private partnerships at institutions of higher education, what the private sector can do, and grappling with questions like “who’s in charge” of changing our Ocean State’s economy. However, none of these approaches directly address the most fundamental and obvious problem: what to do about the government created public policy barriers to success that have restricted economic and individual opportunity, resulting in the worst business climate in the country and the most dismal jobs outlook of any state in our Union. Rhode Island is losing the competition among states, both regionally and nationally, for the precious human and capital resources that are vital building blocks for a vibrant and growing economy that can produce good jobs for its citizens. In this regard, Rhode Island is failing, as evidenced by the Center’s Report Card on RI Competitiveness. Each sub-par grade on the report card represents one more government created barrier that businesses and individuals must overcome in order to succeed. Tearing down these barriers, one by one, with public policy reforms that free-up businesses and workers is the best path our state can take. Further studies and resources are not necessary in this regard: either we double-down on RI’s current high tax-and-spend and regulation approach, or, we reverse course and adhere to a free-market approach. Other states are already racing to establish their own competitive advantages; the Ocean State must keep pace and we do not have the luxury of time to delay action. To unleash our state’s great potential, we must develop a broadly attractive business climate, with a lower tax and regulatory burden for all businesses and individuals that will naturally foster renewed economic activity. It will be less productive to spend time and resources towards an approach that leads to a croynized or politicized strategy that favors certain business sectors, geographical regions, or specific business ventures. The lessons learned from other state laboratories, regarding which policy reforms will enhance economic growth and which will impede growth, have been extensively studied and are now plainly evident. The Center has itself already researched many of these issues within the Ocean State and has released specific policy recommendations via its Prosperity Agenda for Rhode Island, as part of its free-market approach: encapsulated in a 1-page, 3-step summary that will be presented at the press conference on October 11. To reinforce this concept, Jonathan Williams, author of Rich States, Poor States, has also conducted extensive research in this area and is a national expert on state fiscal policy. He will offer his analysis on Rhode Island and will discuss winning and losing public policy trends in other states. IF YOU PLAN ON ATTENDING The event is open to all members of the media and to friends of the Center. As the venue is a private business place, the event is not open to the general public. If you plan to attend, please email info@rifreedom.orgso that we can add your name to the participant list.


Jonathan Williams is a national expert on state budgets and economic policy and author of the book, Rich States, Poor States. Williams will provide detailed insight into how Rhode Island generally compares with other states in its approach to fiscal public policy. Jonathan Williams is the director of the Center for State Fiscal Reform and the Tax and Fiscal Policy Task Force at the American Legislative Exchange Council (ALEC), where he works with state policymakers, congressional leaders, and members of the private sector to develop fiscal policy solutions for the states. Prior to joining ALEC, Williams served as staff economist at the nonpartisan Tax Foundation, authoring numerous tax policy studies. Williams’s work has appeared in many publications including The Wall Street Journal, Forbes, and Investor’s Business Daily. He has been a contributing author to the Reason Foundation’s Annual Privatization Report and has written for the Ash Center for Democratic Governance and Innovation at Harvard’s Kennedy School of Government. In addition, Williams was a contributing author of “In Defense of Capitalism” (Northwood University Press, 2010). Williams has testified before numerous legislative bodies and spoken to audiences across America. He is a frequent guest on talk radio shows and has appeared on numerous television outlets, including the PBS NewsHour with Jim Lehrer and Fox Business News. Williams was also the recipient of the prestigious Ludwig von Mises Award in Economics.

Mike Stenhouse is CEO for the RI Center for Freedom & Prosperity. A Harvard University graduate with a bachelor’s degree in Economics, he was previously the Executive Director of the Ocean State Policy Research Institute. Stenhouse is a frequent guest on many local talk-radio shows, has appeared on many cable mainstream news shows, and contributes frequently to the Providence Journal commentary pages. Prior to beginning his career in the public policy arena, Stenhouse, a former Vice President on the board of directors for RI Special Olympics, was a small business owner and also worked for a Fortune 500 company (Staples) and served as an executive for a $50+ million dot-com company (MyTeam.com). Upon his graduation from Harvard, Stenhouse had an eight-year professional baseball career, including time with the American League Champion Boston Red Sox in 1986, the Minnesota Twins, and the Montreal Expos.