Rhode Island Employment Snapshot, December 2013: RI Alone

The bleakest aspect of the latest employment report from the national Bureau of Labor Statistics (BLS) is that Rhode Island is now all alone in last place.  Whereas the Ocean State moved from 9.0% unemployment to 9.1% unemployment, Nevada dropped from the same level to 8.8%.  Rhode Island is now 0.3 percentage points behind any other state in the country.

The next-bleakest aspect is that, had Rhode Island not lost so many people from its labor force — that is, if so many people had not decided to stop looking for work or had they been replaced in the workforce by somebody else — our unemployment rate would have ticked up to 13.2%

According to the statistics published by the BLS, 680 fewer Rhode Islanders reported being employed than did the month before, and 296 fewer people reported that they’re either working or looking for work.

As the first chart below illustrates, the downward drift of the labor force continues unabated, and November’s increase in employment now looks like the aberration.

The second chart gives a view of the state’s great distance from peak employment.  Both of our neighbors, Massachusetts and Connecticut have seen labor force increases since the beginning of the jobs recession, and both have maintained significantly higher employment

The third chart is new, this month, and compares Rhode Island’s unemployment rate with what it would have been if the state’s labor force had held steady.  The chart makes clear that the Ocean State’s unemployment rate would have been much higher, over the past few years, had people not given up looking for work… almost reaching 14% in 2011.  It also emphasizes the disturbing trend that the only reason the unemployment rate seems to have been stagnant, rather than increasing, throughout 2013 is that fewer Rhode Islanders are counted at all.




Center Signs Letter Urging Executive Office Restraint

Following the President’s 2014 State Of The Union Address, the Rhode Island Center for Freedom and Prosperity, announced that it has signed a national letter urging President Obama to respect the separation of powers, a cornerstone of America’s system of government, and forgo his stated plans to implement new laws via Presidential Executive Order. The letter also demands that Congress aggressively fight every encroachment of its constitutionally defined powers.

A copy of the letter, originated by The Liberty Foundation of America, and signed by CEO Mike Stenhouse, behalf of the Center, along with about 20 other state based think tanks, can be viewed here.

Stenhouse Sales Tax Commission Testimony (1/23/14)

January 23, 2014

TO:                 Joint Sales Tax Study Commission #6

FROM:           Mike Stenhouse, CEO

SUBJECT:      Prepared Testimony Remarks

Good evening. I’d like to first thank the Commission members for their hard work and open minds when it comes to creating jobs and renewed opportunities for Rhode Island families via a new growth economy.

Today, Chairman Malik asked this Commission to consider how to manage the budget implications of potential sales tax reform in Rhode Island. So today, we’re going to talk about revenues and spending. However in light of the earlier, it may be appropriate to review why we’re here.

In fact, perhaps the Governor framed the debate best by suggesting in his recent State of the State address, in effect, that government should play an aggressive role in shaping people’s lives. As we discussed at the last hearing, our sales tax issue all boils down to a larger, philosophical approach as to the proper level of government intervention in our personal lives and in the conduct our business. Indeed, this sales tax issue in Rhode Island has evolved to become part of a larger national debate about “income inequality”.

If we as a state believe that the status quo is hunky-dory for our state, and that generous government services that incentivize people to live a life of dependence is good, then yes, you’ll be inclined to think that more of the same philosophies, policies, and modeling tools utilized, to fall to where we are now, should be what we continue to utilize in the future. The state’s REMI tool falls in this category.

If you believe like we do, that the status quo is the enemy of our future, that every person should have the opportunity to become self-sufficient and thrive, then you’ll be inclined to look for a new approach, and new solutions. Our Center’s RI-STAMP tool represents that new way of thinking.

The old way or a new way? … that is the question. Preserving the current system, or helping our state’s residents?

The testimony you just heard regarding the state’s tax modeling tool, REMI, should not cause you to take your eye off the ball. The question at hand is not which modeling tool is better; rather, the critical question is whether or not the state’s recent economic troubles and its own modeling tool are credible enough reasons to dissuade you from considering the bold NEW reform our Center is recommending and that virtually every witness you heard from supports.

It should be clear to everyone that what we’re doing now – the old way – is NOT working. And virtually everybody outside of the system understands that. The handout we provided to you summarizes the testimony you heard from our prior six hearings. For those of you watching at home, this handout can be viewed on our website – RIFreedom.org – I believe it’s the second item down, called “Testimony Highlights.”

We all heard overwhelming testimony in support of reform from dozens of real residents and real business owners. The only pushback you’ve heard, are from those connected with the                                                                                      system. Again I ask, is good government about preserving the system or helping people?

Taking a step back. Over the past year, as our Center has been raising awareness about the many benefits of repealing the sales tax, I have, admittedly been astounded by the lack of concern about how those benefits might improve the lives of real people. The first reaction, and the disqualifying consideration, right off the bat, for many, is … well how do we make up all the revenues? To the political class – “revenues” are more important than creating opportunities for our fellow Ocean Staters. Our Centers believes otherwise … do you?

When it comes to the impact on the state’s budget regarding sales tax reform, or any tax reform for that matter, I am here to proffer that current levels of spending are hurting our state. To move forward with major tax reform, we must first accept that “revenue-neutral” policies – or limiting ourselves to simply reshuffling the chairs on the deck – are not likely to produce anywhere near the desired economic and jobs boost our state so clearly needs. If, after years of increasing revenues and spending – via taxation – to levels that have caused wreckage to our economy … if, we want to reverse course and actually do something productive that creates economic growth, then it only makes sense that we also must reverse course when it comes to levels of government spending.

If we want economic growth and more shoppers and businesses in this state … as you heard from witness after witness before this very Commission… we must have lower levels taxation, and give them a reason to come to RI. To lower tax levels to be attractive in this regard, we must necessarily lower levels of state spending. We can do this. It is in within the power of this Commission to recommend this. It is in the power of the General Assembly to implement your recommendations … it is allowed!

Across the nation in 2013, economic growth became a top priority for dozens of states; in fact, in 2013, 18 states actually cut taxes! They were allowed to … and they did. In Wisconsin, Governor Walker has proposed $800 million in tax cuts.

A few years ago, Rhode Island, along with Michigan and Indiana, was among the three worst states, nationally, when it came to recovering total jobs, as compared with pre-recession levels. Two states decided to take bold action to change that bold dynamic … yet one state did virtually nothing. Want to guess what state that was? Michigan and Indiana became Right To Work states. Separately, even a perennial high tax state such as NY is now actively promoting tax-free zones to attract and expand businesses. Rhode Island’s opportunity to remain competitive, in its own way, is significant sales tax reform. Will we do it?

Yet there are many for whom the preservation of the size government spending is a more important consideration. Indeed, it is the overall mission of our Center to provide a very different perspective, to think outside that box, and to inject new ideas into the public policy debate, to challenge that status quo thinking.

However, those who defend the status quo see our Center as being disruptive to a political process that has an insatiable appetite for more of our money. We believe a healthy democracy necessarily means rigorous debate. If our Center’s advocacy is seen as disruptive, then so be it … we just see it as a debate. We believe our state needs a new public policy culture. But the status quo is firmly entrenched in our state.

And so far in 2014, we have heard nothing but the same old ‘reshuffling of the chairs on the deck’ from our political leaders.

And what is the status quo that they’re defending? Revenues – on a piece of paper. It seems it’s always about spending. Instead of looking to enhance the well-being of Ocean Staters, our government looks at us as nothing more than ATM machines … to serve the government’s priorities. It is this policy culture that must be changed. It is allowed, and today, you have the power to suggest a bold new step for our state.

Rhode Island is not defined by the amount of money that can be extracted from its residents and businesses, nor by a number at the bottom of a spreadsheet. Rhode Island is not about the size of its government. Rhode Island is about the hopes and dreams of its people – real families who are looking improve their futures through increased opportunities for prosperity.

The status quo that we oppose is all about preserving the system. The reforms we advocate for are about real people –and  job opportunities – and about preserving Rhode Island as home to more and more families and businesses.

You may recall that in my first testimony to this committee in September that I showed you a few charts to keep in mind. Allow me to review:

  • This first chart is what the status quo system is about … ever increasing levels of spending, 25% higher than what inflation and our meager population growth would otherwise dictate.
  • This next chart depicts just one part of the unintended consequence of that approach – showing Rhode Islanders flocking out of our state to neighboring counties in MA and CT to escape to lower  tax burden states. Not because of weather.
  • An this final image portrays the real-life effect … fewer and fewer people at grandma’s dinner table.

A report in today’s ProJo showed that the Census Bureau determined that another 3,922 Rhode Islanders moved out of our state last year. Cutting the oppressive levels of state spending and taxation that caused this undesirable out-migration is possible. We are allowed to do it.

(NOTE: at this point, the testimony was interrupted and not allowed to be completed in its entirety. Only the non-italicized content below was later spoken to the Commission)

 Our Zero.Zero report and recommendation is clearly a departure from the current way of thinking. We intended it to serve that very purpose. And we used a tool, STAMP, that offers a different perspective on how to impact a state’s economy – has the current perspective worked?

 I’d like to repeat what I said at the last hearing: RI is the #1 state in the country when it comes to government spending in the form of “income redistribution”. In theory, if government spending is indeed a stimulus to a state’s economy, and if RI has been doing this at a higher level than most other states, then it would stand to reason that RI should have one of the nation’s best economies.

 Sadly, however, Rhode Island’s reality clearly suggests that this formula of high spending has not worked for our state. As Commission members, it’s up to you to decide whether or not continuing with this same approach will work best for our state’s future. Or whether a new course is warranted.

 It is the position of our Center that instead of making “government revenues” as the state’s number one priority, that we should consider the well-being and future of the taxpayers and residents of our state as paramount! How can we possibly justify limiting their dreams of a brighter future, solely in order to expand the system and the amount of money the state collects and spends?

 Let me share with you a vision we have that that new approach might create. Instead of the seeing the tail-lights of our loved one who are leaving our state, imagine the headlights of cars on I-95 jammed with the traffic of family members, entrepreneurs, investors, and shoppers streaming over the border into Rhode Island. Imagine the parking lots of RI retailers splattered with cars with MA or CT license plates, and, of the extra workers those retailers are able to hire.

 This is what our Center’s sales tax recommendations are all about, as well as putting money back in the pockets of every single individual and business in the state, and for creating thousands of new jobs so that they can have new opportunities and mobility to move up the income ladder and improve their lives.

 In December, a new study showed that while homelessness is decreasing nationally, it has actually increased in Rhode Island. Clearly, increased levels of spending have not worked for those families and individuals in our state.

 Our unemployment rate, though better overall, is not keeping pace with our New England neighbors or the rest of the nation? In fact, we are dead last. Is this acceptable? Is this government working for us?

In fact, even State Tax Administrator, David M. Sullivan, said in November in the ProJo that the recent liquor/wine tax cuts should help to spur sales and boost the state’s economy at an important time for retailers. Why would this effect not be the same across all industries if RI were to obtain a competitive sales tax advantage via its repeal?  

 So I ask: What should we be more concerned about: keeping firmly to arbitrary government spending levels? Or providing real opportunities for families in need and putting them back at real family dining tables?

 If we want out-of-the-box solutions, then we must not box ourselves in by considering only revenue-neutral options.

 The future of Rhode Island families can no longer be held hostage by a bloated state budget. You heard testimony from a national tax expert who said that RI simply does not have the tax base to try to pay for all the services currently on our books. Yet we keep trying to serve more people and spending more and more.

 We believe that our state has been doing it precisely backwards. We have to grow our state’s tax base, by creating an environment where more people will choose to make RI their home, not further burden those who remain.

 In our view, the state budget should be reflective of the goals and aspirations we set for ourselves as proud and aspiring Rhode Islanders … it should not serve to limit those dreams. Our spending priorities must be aligned with advancing our overall well-being … not advancing government to our overall detriment … government spending must be “right-sized”.

 So I ask you to again consider the critical question … the old way or a new way? Should this Commission be dissuaded from supporting potential game-changing policy reforms, such as repealing the sales tax, simply because it’s different from our current failed approach? Or because it is not a revenue-neutral solution?

 In the end, it is up to you to recommend which course will best work for Rhode Island. It’s time to dare to buck the system and forge a new future for our state. It is allowed.

 With regard to specific recommendations from this Commission, our Center hopes that you will decide to take the boldest action by repealing the sales tax entirely, down to Zero.Zero %, and creating the most jobs. Note that we propose to implement this reform as of October 1, so as to spread out the budget impact over two years, and realize one quarter of sales tax revenues in the next fiscal year.

 Think of the low-income families who will keep more of their money in their own pockets and who might find new job opportunities because of the new growth economy.

 Think of the small business owners and restaurants who will no longer have to struggle to comply with the unfunded mandate that they collect taxes on behalf of the state, or spend thousands of dollars in time an legal fees when trying to settle a dispute with the state.

 Think of the cities and towns that will collectively realize over $100 million in new commercial property tax revenues.

 And, for those of you who will participate in this election year, think of how voters will reward you when you support an initiative that will save money for every single family and business in the state.

Something I neglected to mention last hearing and that I ask you to keep in mind, is that any sales tax reduction plan – that does not bring the rate all the way to 0.0% – does little, if anything, to lessen the business compliance costs of this unfunded mandate on retailers, restaurants, and other businesses that have a retail sales permit. Nor can any budget savings be realized through a reduction in the size of the government apparatus designed to audit and collect sales tax revenues.

Any sales tax rate above 0.0% would likely require just as much government infrastructure and just as many compliance burdens for businesses as the current 7% rate.

 A recent report cited Rhode Island as being out of compliance with its tax collection on the recently enacted sales tax on high-end clothing. Repealing the sales tax entirely eliminates these unnecessary complexities and costs of collection, and also puts all RI industries on a level playing field, and will end future nonsensical debates about which industries to tax and which to leave alone.

Our Center additionally suggests two other related recommendations be considered by this commission: first, that a comprehensive review of existing penalties and interest on back sales tax owed be conducted to determine if those statutes are making it overly difficult for businesses to remain open; second, that with sales tax reform that adjustments be made to the current 4% tax levy cap on cities towns so as to allow them to realize the organic revenue growth they will see from a lowered sales tax.

For the first time in decades, our state has the opportunity to take a major step in a new public policy direction, and send a signal to Rhode Islanders that their government places their well-being as top priority.

 In Rhode Island in 2014, this Sales Tax Repeal Study Commission represents the only hope to take to take a major step in a new direction. Rhode Island needs to keep pace with other states. Repealing or rolling-back the sales tax appears to be the only significant economic development policy idea on the table for the entire 2014 legislative session …not only is this something we are allowed to do, but that we must do

The budget can be amended to allow for this, if we have the foresight and take the proper steps to plan how to do it. In this regard, I’d like to introduce our Center’s research director, Justin Katz, who will take you through some of the budget considerations in our original report. Justin will also suggest revenue and spending guidelines that may be helpful to you in determining how the budget may be flexibly managed if significant sales tax reforms are implemented. Thank you.

How to Pay for Sales Tax Repeal

0.0% MEANS MORE! How can RI’s budget accommodate aggressive sales tax cuts? Read our new report, which shows that it is possible … and it is allowed!

[button url=”http://www.rifreedom.org/?p=10084″ target=”_self” size=”medium” style=”royalblue” ]Report: It is Possible[/button]

Paying for Sales Tax Repeal

[button url=”http://www.rifreedom.org/wp-content/uploads/RICFP-payingforit-012114.pdf” target=”_blank” size=”small” style=”royalblue” ]Download report (PDF)[/button]

Throughout the autumn and winter, the Special Joint Legislative Commission to Study the Sales Tax Repeal has been investigating several aspects of the proposal submitted as legislation last session by Representative Jan Malik (D, Barrington, Warren).  Having addressed pros and cons of eliminating the sales tax, as well as estimates of its effects and alternative approaches, the commission arrives at the question of how the state could adjust its budget in order to implement the plan.

Ultimately, bare numbers will have to be hashed out as the Rhode Island House and Senate Finance Committees piece together a budget for fiscal year 2015.  But with a view toward developing a framework within which those numbers can be fit, the Rhode Island Center for Freedom and Prosperity proposes a strategy for considering the reform.

In this new brief, the Center also highlights some areas of budget savings and uses its RI-STAMP model to compare Governor Chafee’s proposed corporate-tax reduction and business energy sales tax exemption with other possible tax reforms, including the elimination of the sales tax and reduction of the sales tax rate to 3%, among others.

The Center estimates that the governor’s plan would produce 540 new private-sector jobs, at a cost in state government revenue of $143,352 each.  By comparison, a 0.0% sales tax rate would produce 25,426 jobs, at a cost of $12,298 each, and a reduction of the sales tax rate to 3% would produce $13,735 jobs, at a cost of $3,500 each.

[button url=”http://www.rifreedom.org/wp-content/uploads/RICFP-payingforit-012114.pdf” target=”_blank” size=”small” style=”royalblue” ]Download report (PDF)[/button]

Sales Tax Commission: Testimony Highlights

Stenhouse testimony from January 23, 2014– the testimony that was shut-down by commission members who didn’t want to hear the truth.

The Center informally compiled highlights from the first six Sales Tax Commission Hearings. Overall, every grassroots person and business owner who testified was in support of repealing or dramatically rolling-back the sales tax. Only insiders from the political class were opposed.

See the document here, which also provides detailed projections of the 0.0% and the 3% scenarios.

QUESTION: who should our government serve? The insiders or the people?

Center Recommends Transfer of HealthSourceRI to Federal Government

FOR IMMEDIATE RELEASE; January 16, 2014                              

Providence, RI – Following the Governor’s Wednesday night address and after initial review of his 2015 budget, where it is obvious that state funds will soon be needed to continue operation of the state’s healthcare exchange, the Rhode Island Center for Freedom and Prosperity, a nonpartisan public policy think tank, today called on public officials to consider termination of the state’s operation of the HealthSourceRI exchange, and instead transfer its management to the federal government, which currently operates exchanges in dozens of other states.

The exchange was originally formed in Rhode Island by executive order by Governor Chafee as part of the implementation of President Obama’s Affordable Care Act, which made federal funds available for its construction through the end of 2014. It is anticipated that subsequent operation of HealthSourceRI could cost Ocean Staters over $20 million per year.

“The exchange is a federal mandate, it is very expensive to operate, and it is clear that we cannot afford it once federal funds expire. Our own General Assembly rejected operation of the exchange in the first place, so how can we justify burdening Rhode Island taxpayers with footing the bill,” asked Mike Stenhouse, CEO for the Center, which plans to conduct further research into exploring the feasibility of executing this transfer.

The Rhode Island Center for Freedom and Prosperity, a nonpartisan public policy think tank, is the state’s leading free-enterprise advocacy organization. The Center works to make a profound, positive impact on the lives of every family and business in the state through the rigorous exchange of market-based ideas and reform solutions aimed at restoring economic competitiveness, educational opportunities and – ultimately – hope for a brighter future.

Health Benefits Exchange Surge of Enrollments, Still Expensive

HealthSource RI has published its enrollment numbers from its opening to January 4, after the deadline to enroll for January coverage.  In continuation of our series putting the number in context, we herein present them with reference to the federal millions that taxpayers provided in order to create an online government broker for Rhode Island’s extremely limited health insurance options.

According to the Center for Consumer Information & Insurance Oversight, under the federal Centers for Medicare & Medicaid Services, the federal government has given $134.7 million in grants aimed, at least in part, at getting Rhode Island’s Affordable Care Act health benefits exchange, HealthSource RI, up and running. Of that, $99.1 million went directly to the Rhode Island government.

As the following chart shows, even with the last-minute rush for plans, U.S. taxpayers have spent $10,011 in direct grants for each of the 9,902 Rhode Islanders who have officially enrolled (having paid their initial premiums).


Adding in the 1,868 people who have completed the application but not yet paid an initial premium, the per-person subsidy decreases to $8,422.

The largest group of enrollees, however, includes the 24,252 Rhode Islanders who used the subsidized health insurance exchange to discover that they are eligible for free healthcare, through Medicaid or the state’s RIte Care program. (Rhode Island opted to follow the Affordable Care Act in expanding the categories of people who are eligible for Medicaid, to include able-bodied, childless young adults.)

That’s 67% of the 36,022 who have completed the application process, a percentage that’s unchanged from last month.  It’s impossible to know how many of those enrollees are new to Medicaid or were already eligible before the Affordable Care Act, but it would appear that the state is well on its way to the 41,185 new people dependent on the government for health insurance that the Kaiser Foundation predicted by 2019.  As the Center pointed out when the state was deciding how to respond to the Affordable Care Act, this expansion could cost Rhode Island taxpayers nearly $60 million per year (and almost half a billion dollars in state and federal spending).

On the other side of the spectrum, only 1,545 (like last month, 4%) are enrolling in plans without claiming additional taxpayer subsidies in the form of financial assistance on their premiums and other expenses.

OpEd: Repeal or Roll-back Anti-growth Laws

OpEd by Mike Stenhouse, CEO, as it was published in the Providence Journal, 1/12/14

As the 2014 legislative session begins, the leaders of Rhode Island’s political class have signaled that they will not let themselves consider any big ideas to boost our state’s stagnant economy or to improve our dismal jobs outlook.

There has been much speculation about what issues the General Assembly will take up. Unfortunately, if recent history is our guide, legislators will do more harm than good, as they see it as the government’s duty to help those who they perceive are in need — those who are harmed by the very policies their predecessors have implemented over the years.

Click here for ProJo link, to view/post public comments

Indeed, public policy in the Ocean State is tearing families apart. We all know of a recent graduate, often one of our own children, who has left town to look for work in a more fertile state; one of our parents who has retired to a lower cost-of-living state; a prominent business or community leader who has fled to avoid taxes on his or her heirs; or a business owner or entire family that has simply uprooted and moved to regions that offer more opportunity.

The government of Rhode Island has implemented dozens of taxes and regulations that have proven harmful to economic growth and job creation. In far too many categories, Rhode Island ranks at or near the bottom — a last-place team.

Yet political leaders act as if they’re not allowed to do anything about it, rather than seeing the status quo as the enemy of our future.

Instead of creating new Band-Aid fix bills, maybe lawmakers should eliminate some of the statutes that have harmed our chances for prosperity in the first place. The most productive path for legislators in 2014 may be to wipe out destructive policies.

Perhaps the General Assembly should be judged this year not by how many new policies it creates, but by how many existing, anti-growth policies it repeals or rolls back.

For starters, we could repeal or roll back the state’s regressive sales tax; or the requirement that families have no choice on what schools best educate their children; or punitive estate taxes that drive wealthy people to other states; or restrictions on out-of-state companies to sell health insurance in Rhode Island; or the minimum franchise tax, which stifles entrepreneurship; or corporate welfare, to level the playing field; or even renewable energy mandates that drive up costs for every family and business. All of these policies have created a drag on our economy, reducing opportunities for those who wish to succeed.

We continue to inflict legislative wounds on ourselves. We are suffering death by a thousand cuts. Isn’t it time we reversed course and healed some of these wounds?

To do this, we would also have to roll back spending levels, the holy grail of the political class; spending levels that fabricated the very same onerous taxes and fees that are the root cause of our economic woes. This seems beyond the imagination of the political class. Yet, this is allowed. Other states are doing it. We are allowed to change course and create a brighter future for ourselves.

Rhode Island is not defined by its government or a budget number at the bottom of a spreadsheet. Rather, Rhode Island is about the hopes and dreams of real people and real families. We should no longer be held hostage by a failed budget. Should our lives and chances for prosperity be restricted by a number? Or, rather, should the budget be crafted to serve our needs? Which should be the higher priority: the well-being of real people or an arbitrary revenue figure? In Rhode Island, we have it precisely backwards.

If we can roll back certain taxes and spending levels, and if the political class can prioritize the well-being of its residents over its fixation on revenues, tens of thousands of new jobs could soon be created, along with a lower cost of living and renewed opportunities for all Ocean State families and businesses.

We must free ourselves from burdensome taxes and a culture of dependency, and be unleashed to improve our own lives and prosperity.

As an analogy, we don’t have to look any further than the 2012 Boston Red Sox, which, as a last-place team, fired its manager, traded away expensive, non-productive players, and brought in fresh talent. The Sox reinvented themselves, and became World Champions just one season later.

Rhode Island faces a similar situation: We must demand new leadership, repeal non-productive policies, and right-size spending. We can do this. It is allowed!