Instead of honor the law to reduce the state's sales tax, faint-hearted House leaders are instead trying to sneak a repeal without public debate.

Center Calls on Lawmakers to Keep and Honor the 6.5% Sales Tax Promise, and Stop its Repeal

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House Budget Seeks to Repeal Sales Tax Cut Statute
Center Calls on Lawmakers to Keep Promise to Taxpayers

Providence, RI — Rather than honor existing state law that specifies a reduction in the state’s sales tax rate, and deal with continued criticism for inaction, faint-hearted House leaders are instead seeking to change the law by attempting to sneak its repeal through the budget without public debate. 

As a sad irony, instead of using the budget process to reduce the sales tax rate for Ocean State consumers, and comply with state law, as the RI Center for Freedom & Prosperity had previously suggested … the House decided to use the budget process to repeal the law, hoping not to raise any public attention. 

“Clearly, the Speaker and House leaders recognize that our Center has been right all along about complying with this state statute,” said the Center’s CEO, Mike Stenhouse. “So, rather than honor the law, they seek to change the law. This disturbing trend of moving the goal-posts will not bring prosperity to Rhode Islanders.”

Now, the Center calls on rank-and-file lawmakers to stand-up for the promise made to taxpayers years ago and to find a way to keep the law on the books, if not demand that the law actually be followed. 

The original rationale for the law was to relieve Rhode Islanders of the added burden of a sales tax imposed on a broader range of “internet” purchased goods, by easing the overall tax rate. The Center, in its 6.5% Sales Tax policy brief argued that the legal threshold had effectively been met by the continued expansion of the sales tax on internet purchases by remote sellers.

“If the political class breaks this sales tax promise, how can Rhode Islanders ever trust the promise made about not imposing tolls on our cars,” asked Stenhouse. “This loss of hope for our state’s political system is one reason why so many of our family and friends are fleeing our state.”

Suffering from a spate of retail store closings and a depressed jobs market, as compared with other states, the Center has repeatedly made the case that Rhode Island would get an economic boost from a reduced sales tax rate, in addition to providing residents with more cash in their pockets.

In its Zero.Zero report many years ago, the Center’s extensive research and economic modeling calling for a full repeal of the state sales tax, or reduction to 3.0%, as the most effective way to grow jobs. Related legislation in 2013 gained significant legislative interest, but ultimately did not advance.

They're called ghost workers. State workers paid for not working, and instead enganing in union business. Your property taxes are only getting higher!

PAID FOR NOT WORKING;TAXPAYER RIPOFF #1: Ghost Workers and the Triple-Whammy of Union Release Time

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One of the most objectionable schemes of government union collective bargaining process, which excessively drives up the cost of government for taxpayers, in ways or at levels that do not exist in the private sector, is being paid for not working. This issue, along with many others defined in the Center’s report, Public Union Excesses, contribute to an $888 million per year in excessive collectively-bargained costs, responsible for driving up local property taxes by up to 25%.

After looking at examples in just a few cities and towns, municipal taxpayers across Rhode Island may collectively be paying millions of dollars per year for unionized government employees to spend their public time on work for their unions … and not to work on the public services they were hired to perform.

Adding insult to injury, the many collectively bargained provisions that specifically allow for these so-called ‘ghost workers’ may actually be in violation of state law. More on that later on.

As detailed in the Center’s landmark report, Public Union Excesses, there are multiple schemes in which government unions benefit from overly generous provisions in collective bargaining agreements, provisions that hardly, if ever, are seen in the private sector.

One such provision is called “union release time.” Under this scheme, unions across Rhode Island use taxpayers as contractual piggy banks to fund union activities. How many Rhode Islanders know that they are paying for ‘ghost workers’ who are paid by the public, but who do not actually perform a public service for some or all of their official time? Instead, a common provision — found in many government union collective bargaining agreements — mandates that taxpayers pay the salary and benefits for for certain public employees, who spend time working on their unions’ business.

Union ‘ghost workers’ impose a triple-rip-off on taxpayers.

First, there is the direct cost of paying public workers for not working on public issues. Second, compounding the cost, taxpayers are further ripped-off because, often, an extra worker must be hired (sometimes at overtime rates) to fill in for the ghost worker’s shift.  Third, union workers who are paid with taxpayer dollars to work on union issues … are working directly against the very same taxpayers who pay their salaries. As the Center’s Public Union Excesses report breaks down, collectively bargained government union excesses directly raise property taxes by as much as 25% for every Rhode Island family and business.

This union release time scheme is indeed a rip-off for taxpayers, as many of the designated union ‘ghost workers’ are awarded six-figure compensation packages, paid for by the public … but without the public’s receiving a commensurate return.

In its report, Public Union Excess, the Center estimates that taxpayers in Portsmouth, Rhode Island, are wasting over $8,176 per year on ghost workers, 100% of which is considered “excessive” in the report. This figure does not include the ‘replacement’ costs to hire additional staff.

However, the ‘ghost worker’ issue is much more costly in other cities and towns. In the Rhode Island’s capital city of Providence, for example, Maribeth Calabro, a special educator, whose $83,848 salary and compensation package worth well over $100,000 per year is paid for by local taxpayers, is also president of the Providence Teachers union. Per the city’s collective bargaining agreement with her Providence Teachers Union, Calabro is allowed to spend 40% of her teaching time (with full pay and service credit) to conduct union activities, costing taxpayers over $33,000 per year. Add in the cost of substitute teachers, estimated at over $16,000 per year, and Providence taxpayers are being ripped-off to the tune of almost $50,000 per year … just for this one teacher.

In the 2016 East Providence teachers’ contract, high school teacher and local union president Nicholas Shattuck is allowed to spend 40% of his teaching time, as part of his estimated $70,000 salary, on union business. “The President of the Association shall be relieved of all his/her non-teaching duties to take care of Association business. In addition, the President shall be provided the equivalent of two (2) full days per week at no loss in salary or benefits and the Association agrees to pay one-half (1/2) of the cost. Meaning that the School Department pays for one day and the Association pays for one day.” The estimated net ‘ghost worker’ cost of $14,000 per year, plus substitute costs at around $15,000 per year, means that East Providence taxpayers are bearing costs of almost $30,000 per year for this one paid public employees to conduct union business that constantly works against the better interests of those same taxpayers.

In Tiverton, there is a minimum trifecta of ‘ghost worker’ union release time provisions.  Elementary school teacher and local union president Amy Mullen is allowed one teaching period per day (20%)  for “union business.” At a salary of over $75,000 per year, the total rip-off to taxpayers, including the cost of substitute teachers, is likely over $30,000 per year. Provisions in Tiverton’s firefighter and police union contracts are less costly, having mainly to do with periodic conventions and meetings, but still may add over $10,000 per year in ‘ghost worker’ costs to taxpayers.

The above examples do not take into account common provisions that relieve union officers of “non-teaching duties” (for example). We did not attempt to value these activities, but exempting union officers likely has a cost of thousands of dollars, either in lost benefit to taxpayers and constituents or in the increased burden on other employees.

Unauthorized release time. But the rip-off to taxpayers does not end here. While it’s one thing for taxpayers to bear the burden for “authorized” release time as collectively-bargained for ghost-workers, it’s quite another thing for these same ghost-workers to cause “unauthorized” release time for co-workers. For instance, our Center has anecdotally been told by numerous former educators that it is common practice for local union NEA officials, who themselves were on release time to conduct ‘union business’ at the expense of the taxpayers, to simply walk into classrooms and pull other teachers (and fellow union members) out of their classes for meeting on various topics … often leaving entire classrooms unattended. In one instance, the so-called ‘union business’ that the authorized and unauthorized ghost-worker teachers were discussing … was to scheme how to get rid of a school administrator that the union did not like.

On the legal side, state law appears to prohibit these collectively bargained schemes. Under the state Labor Relations Act, Rhode Island General Law 28-7-13 states that “it shall be an unfair labor practice for an employer to” give preference to “any employee organization”:

By compensating any employee or individual for services performed in behalf of any employee organization or association, agency or plan, or by donating free services, equipment, materials, office or meeting space, or any thing else of value for the use of any employee organization or association, agency, or plan; provided that an employer shall not be prohibited from permitting employees to confer with him or her during working hours without loss of time or pay.

Rhode Islanders expect their hard-earned money to be spent to educate our children, protect our homes and businesses, or to provide other vital services. We do not expect that our money will be spent to advance the work of overly politicized unions.

According to our Center’s report and this follow-up post, not only are taxpayers grossly overpaying for government services, but they’re also regularly paying out their hard-earned money to government workers who are not even working! Whether it’s paying for release time where union members are paid by taxpayer for doing union work, overly generous vacation and personal days, paying for public employees on sabbatical, paying for suspended workers, paying for years and years for people out of work on dubious injury claims … or paying unsustainable levels of post-employment benefits …  taxpayers are being ripped off.

If public workers want to assist their unions, the should do so on their own time or be paid out of  the dues of union members … not on public time and certainly not on the public nickel. If we can bring these and other public union excesses into line with the private sector, your property taxes could be reduced by 25%.

Ghost Workers – Government Workers who are Union Officials Paid for Not Working – Drive-up Property Taxes

And it may even be illegal …

Providence, RI— One of the most objectionable schemes of collective bargaining contracts with government unions are provisions not found in the private sector that pay workers for not working, that increase the cost of government, and that unfairly drive up property taxes. Even more egregiously, in this case, public employees are being paid by taxpayers to work for someone else.

According to a post today as follow-up to to the RI Center for Freedom & Prosperity’s landmark Public Union Excesses report on the excessive costs of collectively bargained government services, ‘union release time’ provisions that allow for “ghost workers” – public employees paid by the public NOT to conduct work for the public; but rather paid by the public to conduct union work – are a major taxpayer rip-off.

In the post, Paid For Not Working; a Taxpayer RipOff; Ghost Workers and the Triple-Whammy of Union Release Time, multiple examples of contract language, as well identification and cost-calculation of actual ‘ghost workers’are provided.

“Worse, this unfair and unjustifiable practice appears to be in direct conflict with state law,” exclaimed Mike Stenhouse, CEO for the Center. 

For example, in the city of Providence’s collective bargaining agreement with the Providence Teachers Union, publicly paid special educator, Maribeth Calabro, also the local union president, is contractually allowed to spend 40% of her school schedule (with an estimated $100,000+ compensation package) on union business. Add in the cost of substitute teachers and the total annual cost to taxpayers likely exceeds $60,000 per year.

The full ghost worker post provides other individual examples and also discusses:

  • The ‘triple-whammy’ on taxpayers, once substitute worker costs are added-in
  • State law on what constitutes and “unfair labor practice”
  • Further abuses of unauthorized release time

“If public workers want to assist their unions, they should do so on their own time and on the union’s nickel,” suggested Stenhouse, “and certainly not at the taxpayers’ expense.”

According the Center’s May 2019 Public Union Excesses report, Rhode Island taxpayers dish-out $888 million per year (or $3500 for a family of four) for excessive compensation provisions in collective bargaining agreements with government employee unions, which may drive up local property taxes by as much as 25%.

Employment Rate Rhode Island Jobs April 2019

Jobs & Opportunity Index (JOI), April 2019: The Consequences of Treading Water

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In an unusual circumstance 11 of the 12 datapoints used for the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI) were updated for April, and the end result was not a happy one. RI overtook Louisiana in 2017 to claim the 47th rank in the country after five years at 48. For the month of April, RI has lost that gain, despite improved numbers by five measures.

Click for full PDF including national table

Employment was not one of those five, down another 269 people from the first-reported number for March, and the labor force dropped yet another 1,009. Jobs based within the state represented a bright spot, with an increase of 5,400. Alternate measures of unemployment gave RI two more positive developments, with long-term unemployment down 600 and marginal attachment to the labor force down 200. However, this seems likely to have been caused by worker exits. This more-negative interpretation is justified by the fact that people who are involuntarily working part time increased by 1,100.

On the welfare side, the Ocean State had 5,209 fewer people on Medicaid, which is positive. However, enrollment in TANF (welfare) was up 407, and the state still cannot manage to update its SNAP (food stamps) data, which haven’t moved since February 2017. The taxation picture is mixed. The federal government collected almost $200 million less from Rhode Islanders, but state and local taxation increased by $41 million.

The first chart shows RI remaining last in New England on JOI, at 48th. New Hampshire leads the region, in 3rd place, nationally. Vermont fell two spots, to 14th place, while Maine held steady in 18th. Massachusetts also remained in place, at 36th, but Connecticut dropped two, to 44th.

Race To First Place Jobs & Opportunity Index Rhode Island, New England Jobs April 2019

The second chart shows the gaps between RI and New England and the United States on JOI, and the third chart shows the gaps in the official unemployment rate. RI’s gap improved slightly in all cases.

Scores on Jobs & Opportunity Index- Rhode Island, New England, United States Jobs April 2019
Unemployment Rate Jobs & Opportunity Index- Rhode Island, New England, United States Jobs April 2019

Results for the three underlying JOI factors were:

  • Job Outlook Factor (optimism that adequate work is available): RI fell four spots, to 28th.
  • Freedom Factor (the level of work against reliance on welfare programs): RI fell six spots, to 48th.
  • Prosperity Factor (the financial motivation of income versus taxes): RI remained 47th.

Click here for the corresponding employment situation post on the Ocean State Current.

Click for full PDF including national table
Greedy union bosses have corrupted state government, restricting municipal policymakers from governing their own affairs at the local level closer to the people.

Perpetual Contracts Will Keep Rhode Island in Perpetual Decline

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Providence, RI— Statement from Mike Stenhouse, CEO for the RI Center for Freedom & Prosperity on the “perpetual (evergreen) contracts” legislation that was signed into law today by the governor:

“The number one driver of the Ocean State’s declining population and jobs numbers –  are high property taxes. Our Public Union Excesses report clearly connects high property taxes with the excessively high costs of collectively bargained government services. This new ever-green contracts law will keep property taxes ever-high.

We continue to give an unfair advantage to the wealthiest and most connected insiders of the population, and now these special-interest groups come before the Rhode Island people and saying we don’t have enough … and we want more? This is outrageous!

It is clear today, that after 10 years of the slowest economic recovery among all states, Rhode Island’s political leaders are not fulfilling their promise to help the average family. Instead, by heaping more and more favors upon those who help get them elected, politicians have lost the trust of the people.

Beyond the financial costs, there is a more corrosive impact from this kind of political cronyism. People are fed up with betrayals from lawmakers who have forgotten them, who cater to special interest groups, and who make it harder to live and take care of their families and business – and to continue to reside and work in Rhode Island.

Sadly, Rhode Islanders will now have even less hope for our state, with even less trust in their government! In this case, perpetual contracts will make it much more likely that the state of Rhode Island will remain in perpetual decline.”

Public Union Excesses, the largest research report ever produced by the Center, details how Ocean State taxpayers are dishing out an extra $888 million per year as compared with their private sector counterparts; findings that are consistent with previous national studies, including a report by the Center in 2012. Rhode Island property taxes would be 25% lower were it not for the ‘excessive’ costs imposed on families and businesses for collectively bargained government services, in providing up to a 27% total compensation premium for government workers.

The Center refutes the unsubstantiated & off-target NEA-RI claims made by two government union officials in publicly responding to our Union Excess Report.

CENTER Refutes NEA-RI Claims about its Cost of Collective Bargaining Report

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Unions Respond with Mindless Attacks and Unsubstantiated Claims

Teachers Union Response Addresses the Wrong Points

Correction

Providence, RI— The Rhode Island Center for Freedom & Prosperity refutes the unsubstantiated and off-target claims made last week by two government union officials in publicly responding to the Center’s Public Union Excesses report. The eye-popping report details how Ocean State taxpayers are dishing out an extra $888 million per year in providing 26% total compensation premium for government workers as compared with their private sector counterparts, and that drive local property taxes 25% higher than they need be.

Typical of union tactics seeking to avoid discussion of the issue at hand, labor officials try to change the topic by responding with a barrage of subterfuge and attacks on the messenger. 

Robert Walsh, executive director of the National Education Association of Rhode Island made a series of apparently incorrect and misguided public comments when he claimed that Ocean State public school teachers make about $14,000 less in salary than their Massachusetts counterparts.

Mr. Walsh’s statement is off-target for a number of reasons:

  • The Center’s report focused on “total compensation”, while Walsh focused on just the “salary” component
  • The Center’s report compared all public sector workers to private sectorworkers in Rhode Island, while Walsh compared RI public teachers to MA public teachers
  • Most importantly, Walsh’s figures, in his attempt to downplay compensation for Rhode Island workers, do not match with public reports.

In his statement last week to the Providence Journal, Walsh claimed that RI teachers averaged $66,758 in salaries, compared to $80,357 in Massachusetts – a gap of $14,000.

However the salary figure reported in the official Employees’ Retirement System of Rhode Island (ERSRI) report show an average 2018 RI teacher salary of $77,581 – about $11,000 more than Walsh claimed. Further, the similar report in MA shows their average teacher salary (including Boston) was just $74,156 – about $6,000 lessthan he claimed. 

Walsh proceeded to dig himself into a deeper hole when he claimed on Twitter that the Rhode Island ERSRI figures were inflated because higher paid superintendents and other non-teaching positions were included: yet this reasoning ignores that the Massachusetts figures likely also include such positions, which only would minimally change the calculations by 1-2%. 

Per these two reports, Rhode Island teachers make about $3,000 more than do their Bay State counterparts, not the $14,000 less as claimed by Walsh.

Mr. Walsh’s initial statement about any gap could be off by as much as a whopping $17,000. When asked on Twitter to provide documentation for his figures, Mr. Walsh did not respond.

Additionally, the president of AFSCME, the largest government worker union in the state, J. Michael Downey, joined with Walsh in questioning the Center’s donor base and why it is not publicly disclosed. 

“Rather than professionally responding to the findings in our report, once again progressive-union-left leaders seek to shut down open and honest debate by mindlessly attacking the messenger,” responded Mike Stenhouse, the Center’s CEO. “Both Walsh and Downey know that the US Supreme Court has ruled that their is a major difference between government transparency and privacy for nonprofit organizations; and that donors to groups like our Center should be protected from recrimination by the  government or by over-zealous activists.” 

The Center is proud to have earned the support of about 500 in-state donors in support of its core mission to return government to the taxpayers. The Center accepts no public funding and receives no contributions from any out-of-state group that attempts to influence its agenda. The Center’s full donor privacy policy can be viewed here. 

The 48-page report was researched and co-authored by adjunct scholar to the Center, Dennis P. Sheehan, and by the Center’s research director, Justin Katz. The reports’ findings are consistent with previous national studies, including a report by the Center in 2012.

The full report also includes tables with town-by-town estimates of the excessive total compensation costs of government workers at the municipal level, in school districts, and in independent fire districts. 

CORRECTION: Stuart Peterson, actually the former School District Finance Committee Chair, in commenting on East Greenwich’s $9.5 million excess, was incorrectly listed as former Town Finance Director in the Center’s original media release last week: “The report’s findings are certainly in line with what we have seen in East Greenwich for the last 30 years. Our residents have seen (property) tax increases three times that of inflation, and up to four times that of median household income wage growth.”


Rhode Island property taxes would be 25% lower if not for the excessive costs imposed on families & businesses by collectively bargained public unions.

CENTER’S NEW REPORT: Public Unions Cost Rhode Islanders $888 Million Per Year

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Property Taxes on Families & Businesses Driven Up By 25%

“Firefighter Overtime” and “Evergreen” Bills Would Give Unions a More Unfair Negotiating Advantage

Providence, RI– With two-thirds of the statewide burden heaped on local taxpayers, Rhode Island property taxes would be 25% lower were it not for the ‘excessive’ costs imposed on families and businesses for collectively bargained government services, according to a major report released today by the Rhode Island Center for Freedom & Prosperity.

Click Here Now To Read The Report

Public Union Excesses, the largest research report ever produced by the Center, details how Ocean State taxpayers are dishing out an extra $888 million per year in providing up to a 27% total compensation premium for government workers as compared with their private sector counterparts; findings that are consistent with previous national studies, including a report by the Center in 2012.

Rhode Island residents could save 25% on their local property taxes, while state taxpayers could realize even further savings if public services in the Ocean State were provided at competitive market rates.

“Our state cannot survive morally or economically with this obvious imbalance. At $888 for each Rhode Islander, a family of four is paying over $3500 annually for these excessive compensation deals,” emphasized the Center’s CEO, Mike Stenhouse. “We must find a better balance between how much union members are paid and how much taxpayers can afford.”

The 48-page report, which utilized regression analysis calculations that controlled for experience and educational levels, was researched and co-authored by adjunct scholar to the Center, Dennis P. Sheehan, who is Professor Emeritus at the Penn State University Smeal College of Business, and who taught Finance at Penn State, Purdue University, the University of Chicago, and the University of Rochester. The report was co-authored by the Center’s research director, Justin Katz, who is one of the state’s leading analyst of the state’s jobs market and overall economy. 

Among the primary drivers of excessive public union employee total compensation, up to 27% higher than for comparable services in the private sector, are:

  • The 9th most favorable pro-union laws in the nation
  • A 4-6% base “wage premium”
  • Overly generous pension and healthcare benefits
  • Systematic overtime abuse
  • Numerous collectively-bargained cash-back schemes

The “firefighter overtime” mandate bill that passed the House in April and the “evergreen contract” legislation that passed the House in May would each create new state laws granting additional unfair leverage to local union negotiators.

The Public Union Excesses report discusses in some detail how its findings are supported by prior national studies and also includes a line-by-line budget analysis of the median Rhode Island town of Portsmouth. 

One chart in particular from Portsmouth demonstrates the lost opportunity cost, whereby excessive total compensation payments mean less money to spend on other important projects. For example, the $590 million aggregate annual municipal savings could easily pay for all necessary school building repairs and upgrades in just three to four years, estimated to be at over $2 billion, statewide.

Portsmouth Total Compensation Excess Estimates Portion of Budget, FY16 The “remaining budget” is what the town currently has to spend a er compensation. The low-end estimate is most likely to be excess and therefore available for other purposes, while the high-end estimate is least likely to be excess and therefore needed for compensation.

“Treating the 10% of unionized government employees more like the 90% of the rest of us are treated …  is not only more fair but also builds trust that government is looking-out after everyone the same,” concluded Stenhouse.

The full report also includes tables with town-by-town estimates of the excessive total compensation costs of government workers at the municipal level, in school districts, and in independent fire districts. 

Many state and municipal leaders also provided statements that say the reports’ statistically-determined findings match up well with their actual local budget analysis:

Mike Riley, municipal pension expert on Providence’s $110 million annual total compensation excess: “This massive over-payment in the budget directly hinders the City’s capacity to properly fund its critically under-funded pension plan.”

Ken Block, WatchdogRI.com, regarding the nation’s highest-cost for firefighter services in RI: “It is time to bring local municipal labor contracting into the light. A lack of transparency helps labor and elected officials hide the true cost of municipal labor contracts.”

Rob Cote, Warwick watchdog on his city’s estimated $54 million annual excessive overpyament: “… the actual numbers taken from official Warwick budget documents substantiate the analysis in the Center’s report …”

Stuart Peterson, former School District Finance Committee Chair, on East Greenwich’s $9.5 million excess: “The report’s findings are certainly in line with what we have seen in East Greenwich for the last 30 years. Our residents have seen (property) tax increases three times that of inflation, and up to four times that of median household income wage growth.”

Larry Fitzmorris, East Bay Taxpayers Association, on Portsmouth’s $10.2 millionexcess: “The millions of dollars of excessive costs identified in the report represents institutionalized spending borne by the taxpayers that is completely unnecessary.”

Rob Coulter, President Tiverton Town Council on its $7.4 million over-payment: “This high-quality study is incredibly insightful, and is sure to help us as we keep striving for the right balance of having a first-rate municipal workforce at a cost that is fair and affordable to our residents.”

Jobs & Opportunity Index (JOI), March 2019: In Need of a Turnaround… Soon

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Although its rank did not change, March was not a good month for Rhode Island on the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI). With four of the 12 datapoints’ changing, RI is still 47th in the country, but slippage in employment and income brings a warning sign of things that might be yet to come.

Click for full PDF including national table

Employment was down another 521 people from the first-reported number for Feburary, and the labor force dropped 1,234. Jobs based within the state showed an increase of 300, but the prior number has since been revised up, so the official news is no change.

The Bureau of Economic Analysis (BEA) released quarterly data for personal income in each state, and Rhode Island is the only one to show a decrease from the first-reported number for the prior quarter. We should note, however, that the numbers from last quarter have been revised down enough that the decrease actually shows as an increase in the official data.

We should also note that Rhode Island remains the only state that is unable to report estimates for monthly enrollment in the federal SNAP program (foodstamps). Until this problem is repaired, we will simply hold Rhode Island’s enrollment at the last-reported level, which is from February 2017.

The first chart shows RI remaining last in New England on JOI, at 47th. In New England, New Hampshire leads the region, in 3rd place, nationally. Vermont fell a spot, to 12th place, while Maine held steady in 18th. Massachusetts and Connecticut also held their positions, at 36th and 42nd, respectively

Rhode Island Jobs March 2019 New England Race To National First Place

The second chart shows the gaps between RI and New England and the United States on JOI, and the third chart shows the gaps in the official unemployment rate. RI’s gap improved slightly in all cases.

Rhode Island Jobs March 2019 New England Scores on Jobs & Opportunity Index
Rhode Island Unemployment Rate, Jobs March 2019, New England Jobs & Opportunity Index

Results for the three underlying JOI factors were:

  • Job Outlook Factor (optimism that adequate work is available): RI remained 24th.
  • Freedom Factor (the level of work against reliance on welfare programs): RI remained 42nd.
  • Prosperity Factor (the financial motivation of income versus taxes): RI remained 47th.
Click for full PDF including national table
Despite a booming national economy, Rhode Island's economic outlook dropped back into the bottom-10 among according to Rich States Poor States by ALEC.

Progressive Policies Sink Ocean State Back into the Bottom-10

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Providence, RI– How much bad news can our state absorb before its political leaders change course, asks the Rhode Island Center for Freedom & Prosperity? Fittingly, it is on Tax Day that high taxes once again are cited for sinking the Ocean State.

Despite a booming national economy, many recently published metrics show Rhode Island is heading in the opposite direction, underscored by today’s announcement that the Ocean State’s “economic outlook” dropped three-slots and back into the bottom-10 among all states, according to the 12th edition of the Rich States Poor States publication, produced by ALEC (the American Legislative Exchange Council). 

“Our state is squandering its opportunity to remain competitive and to increase prosperity for its residents,” says Mike Stenhouse, CEO for the Center, who participated in a national conference call last week to preview today’s ALEC release. “This report reinforces all of the research and projections our Center has conducted in recent years. The upcoming a census will likely deliver the worst news for the Ocean State, which is losing the population battle. As this report again highlights, states with free economies and lower taxes are likely to see an increase in population, while the unfriendly economies with high tax and spend policies, like Rhode Island, are seeing a relative decrease.”

According to the Center, Rhode Island, is falling behind by standing still. While state politicians crow each year about not implementing broad new taxes, the unfortunate truth is that by nickle-and-diming residents and by not implementing aggressive reforms Rhode Island will continue to lose ground, nationally. As other states have moved to increase economic freedom for families and business, Rhode Island is losing ground by standing still: to reverse course, it must work quickly to reduce its onerous tax and regulatory burdens.

However, there is no indication that any political leader in Rhode Island has the courage to steer the state’s ship in the right direction. Encumbered by blind-dedication to a bloated budget, which itself is the state’s primary problem (with all of its taxes, fees, and mandates), lawmakers have put forth no vision and are stuck in the rut of continuing the policies of stagnation. 

According to ALEC’s Rich States Poor States, top-10 states such as #5 Indiana and #6 North Carolina are the most dramatic examples of states moving up the rankings by reforming their tax codes, as just a few years ago each state was in ALEC’s mid-20s. Conversely, Kansas, which has raised taxes in recent years has fallen from the mid-teens to 27th. 

Among the major factors cited by ALEC in Rich States Poor States leading to Rhode Island’s poor rankings are: 

  • High property tax burdens (47th)
  • High estate taxes (50th)
  • High Debt (46th)
  • High minimum wage (41st)
  • Workers Compensation costs (43rd)
  • Lack of workplace freedom (50th)
  • Unsustainable pension liabilities 

“Because of federal tax reforms, millions of good-paying new jobs are being created and trillions of dollars are being repatriated to US. But given RI’s hostile business climate, we are less likely to see major new capital investment or rapid job gains in our state,” concluded Stenhouse.

Legislation to Avoid SALT Cap Named Bad Bill of the Week

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Rhode Island lawmakers continue to stick their heads in the sand when it comes to the stagnant Rhode Island economy and weakening jobs market. Instead of directly addressing the core issues that are producing these negative outcomes, which run counter to positive national trends, the political class prefers to divert attention to band-aid policies that perpetuate the problem.

It is for this reason that H5576, the so-called Business Corporation Tax legislation, has been named the Bad Bill of the Week by the RI Center for Freedom & Prosperity. The legislation seeks to provide small business owners with a dubious option to avoid the $10,000 SALT (State And Local Tax) cap, defined in the 2017 federal tax reforms.

Even the highly respected and nonpartisan Tax Foundation in Washington, DC, wrote a post on the wrong-headedness of this legislation, which seeks to circumvent federal tax laws.

Ignoring the fact that state and local taxes are too high in Rhode Island, driving many people and businesses out of state, the legislation instead seeks to help small business owners by reducing the their federal tax burden; in essence, denying the federal government its lawful share of pass-through revenues that are usually associated with S-corporations, limited partnerships, and sole proprietorships.

State lawmakers should not seek to blame the federal government for the high state and local taxes that they, themselves, have imposed on the private sector. Further, the IRS has publicly signaled that it will not take kindly to state-based efforts to interfere with taxes owed to the federal government.

To encourage entrepreneurship, pass-through entities were created to relieve small business investors of the burden of double-taxation, both at the corporate level and then again upon distribution of profits at the individual level. Instead, profits under a pass-through structure flow entirely to its investors, to be taxed only once at the individual level – both federally and by states.

The 2017 Tax Cuts and Jobs Act limited the amount of SALT deductions allowed on federal tax returns. In high tax states, such as Rhode Island, this means that certain people may not be able to federally deduct all of the taxes they are charged by their state and localities.

The proposed legislation in Rhode Island would allow pass-through businesses to pay “state” taxes on its profits at the ‘entity’ level (instead of passed-through to individuals). This scheme would effectively transpose a potentially non-deductible SALT tax into a fully-deductible business expense. A revenue-neutral policy at the state level, this entity level tax scheme will almost certainly be challenged by the IRS in that it would reduce federal tax receipts.

The proposed legislation in Rhode Island would allow pass-through businesses to pay “state” taxes on its profits at the ‘entity’ level (instead of passed-through to individuals). This scheme would effectively transpose a potentially non-deductible SALT tax into a fully-deductible business expense. A revenue-neutral policy at the state level, this entity level tax scheme will almost certainly be challenged by the IRS in that it would reduce federal tax receipts.

This legislation is objectionable for two main reasons. First, the IRS is unlikely to allow this sleight-of-hand to circumvent existing tax law. Second, and more importantly, the legislation avoids the actual core problem – high state and local taxes in Rhode Island.

As long as lawmakers refuse to deal with the real problems that plague our state, Rhode Island’s economy and the standard of living for its residents will continue to lag behind the rest of the country.

As the Tax Foundation concludes, and as the Center has long maintained, “States would be better off using their creative energy to reform their tax codes and alleviate the overall burden on taxpayers.”

Jobs & Opportunity Index (JOI), February 2019: Employment and Jobs Turn Down

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Given the short time between reports, only three of the 12 datapoints of the RI Center for Freedom & Prosperity’s Jobs & Opportunity Index (JOI) have changed for February, but the changes are important. After a disappointing downward revision of Rhode Island’s employment data from the Bureau of Labor Statistics (BLS) wiped away most of the employment progress Rhode Islanders had made in 2018, February showed an additional downturn. That downturn didn’t change the index ranking or the subrankings, so the Ocean State is still 47th in the country.

Click for full PDF including national table

Employment was down another 570 people from the first-reported number for January, and the labor force dropped 951. An additional 1,400 jobs based within the state joined the 9,000 that disappeared the month before.

The first chart shows RI remaining last in New England on JOI. Although underlying scores moved, the three measures that changed did not cause any variation in rank from the month before across the country.

In New England, New Hampshire leads the region, in 3rd place, nationally. Vermont remained in 12th place, and Maine in 18th. Massachusetts is still 36th, and Connecticut stands at 42nd.

New England Jobs February 2019 Race To First Place

The second chart shows the gaps between RI and New England and the United States on JOI, both staying about the same. That was true of the third chart, also, which shows the gaps in the official unemployment rate.

United States Jobs February 2019 Scores
Unemployment Rate Rhode Island Jobs February 2019

Results for the three underlying JOI factors were:

  • Job Outlook Factor (optimism that adequate work is available): RI remained 24th.
  • Freedom Factor (the level of work against reliance on welfare programs): RI remained 42nd.
  • Prosperity Factor (the financial motivation of income versus taxes): RI remained 47th.

See here for the corresponding post focusing on employment from the Ocean State Current.

Click for full PDF including national table