Center for Freedom presents at RI Hospitality Board Meeting

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Mike Stenhouse, CEO for the RI Center for Freedom & Prosperity, presented the findings from the Center’s Policy Brief on the Governor’s proposed “sales tax hike” to the Board of Directors of the RI Hospitality Association this morning. Also discussed was the upcoming “Eliminate the Sales Tax” report that the Center hopes to release before the end of April.

The presentation was well-received by the 25 or so Board members on hand. Following Stenhouse’s presentation and a brief Q & A session, the two organizations agreed to seek to work more closely together on issues of common interest.

The Board presentation was requested following Stenhouse’s popular speech at the Anti-Meals Tax Rally held in March., which was organized by the RI Hospitality Association. See the entire speech, photos, and a post-event interview on the Dan Yorke show … by clicking here.

Special thanks to Executive Director, Dale Venturini, and Chairman, Ken Cusson, for inviting our Center to make its presentation.

Task Force OpEd in ProJo: All RI Communities in Deep Trouble

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by MIKE STENHOUSE and RICK DANKER

Rhode Island has become ground zero for the public-employee pension crisis owing to the size of the unfunded pension liabilities the state and its cities face along with the sad story of the Central Falls bankruptcy.

But, unlike other states stuck in similar situations, the Ocean State has been proactive in making solid reforms to reduce this debt load. This month, Governor Chafee introduced a municipal pension reform plan that will enable localities to make cuts similar to what the state made with its reform late last year.

The centerpiece of the governor’s proposal is legislation to let the state’s independent pension plans suspend annual cost-of-living adjustments (COLAs). Eileen Norcross, senior research fellow with the Mercatus Center at George Mason University, and a member of the Rhode Island Center for Freedom and Prosperity’s national pension task force, finds that a 1 percent reduction in the COLA reduces the overall pension plan liability by 10 percent.

The magnitude of this cost savings is clear in the data on the task force’s transparency website, RIOpenGov.org? , which shows the difference in a 3 percent COLA and no COLA on projected future pension payouts to the top-earning retirees to be around $1.5 million. Cranston, for one, would cut its total projected future pension costs associated with its 421 public police and fire retirees from $579 million to $410 million with this change.

To qualify for the COLA suspension — which the state already enacted with its own reform legislation — local pension plans must be in a “critical status” of a funded level below 60 percent. As the governor’s plan notes, the most recent average reported funded level for the plans is just 40 percent.

But this reporting doesn’t tell the whole story of local pension debt. When these liabilities are calculated using private-sector valuation rather than assumed investment returns, the picture gets even worse.

Norcross and her Mercatus Center colleague Benjamin VanMetre in November 2011 calculated the average funded level to be 29 percent using Treasury bond yields. The unfunded liabilities belonging to the 36 Rhode Island cities with their own pension plans was therefore $6 billion rather than the reported $2.4 billion.

Utilizing private-sector valuation, every locality in Rhode Island would be funded below 60 percent, according to this same Mercatus report. We question, then, why there should even be a “critical status” test in the legislation.

This truth about local pension debt means that many of these municipalities will ultimately need to do more than suspend COLAs. They will need to consider adjusting benefit formulas, capping pension payments, or offering buyouts to pare down this debt. The alternative is to let the burden remain on taxpayers, either in the form of higher taxes, cuts in public services, or both. Those are particularly bad options in Rhode Island, where emigration to other states and towns is just a short trip away.

Governor Chafee should be commended for acting decisively on the public-pension crisis and introducing a plan to give the municipalities a head start on reform. It is now up to the legislature to quickly pass this into law. But the hard work will remain for those cities and towns deemed to be in “critical status.”

They should now calculate and disclosure their pension debt using market valuation so their citizens know full extent of the unfunded liabilities. Then they should come up with reform plans that use every legal option available to spare those citizens from having to prop up uncontrollable pension plans. Rhode Island will benefit when the state’s enablement of the COLA suspension is combined with the opportunity for its fiscally-distressed cities and town to design their own reform plans.

When adding the often-overlooked burden of other post employment benefits (OPEB), the public retirement crisis — decades in the making as benefits outstripped contributions through government overpromising — is the state and local finance issue of our time. It threatens foundations crucial to making government work, such as truthfulness about finances and fairness in allocating public services and benefits. When they get the state’s go-ahead to start reducing their pension obligations, Rhode Island’s cities and towns will have no excuse not to take it on.

Mike Stenhouse is CEO of the conservative Rhode Island Center for Freedom and Prosperity. Rich Danker is director of economics at American Principles in Action, a conservative Washington policy organization. Bot individuals are part of the RI Center for Freedom’s national task force on Pension Reform in the Ocean State.

Click here for image of the actual ProJo OpEd page …

Center for Freedom research at anti Meals-Tax Rally

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On March 22, CEO Mike Stenhouse presented research detailing the negative consequences Rhode Island might expect if the Governor’s proposed Sales Tax increase were to be implemented.

See the full Policy Brief here …

Listen to the Mike Stenhouse Radio Interview w/ Dan Yorke

Mike Stenhouse presents research at the anti Meals Tax rally at Waterplace Park

 

 

 

 

 

Watch Mike Stenhouse’s speech here on YouTube …

See the entire anti-meals tax speaking program here …

MEDIA COVERAGE:

RhodyBeat: http://rhodybeat.com/stories/Protesters-didnt-cry-over-spilled-tea,69209

Woonsocket Call: http://www.woonsocketcall.com/node/4887

 

Commentary: Fabrication by Rhode Islanders for Tax Equity

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George Nee and RIFuture.org should be Called-Out for Promoting Misleading Info

In promoting their plan to tax the rich, the Rhode Islanders for Tax Equity group recently put out a misleading video and chart attempting to equate a drop in Rhode Island’s income tax rates on the wealthy to the rise in the state’s unemployment rate.

Absent any credible citations, the group might just as well have blamed America’s exploding national debt on Rhode Island’s state income tax.

The group, RIFuture.org (its web partner), and George Nee (group member and president of the AFL-CIO) should be called out for propagating these non-credible assertions.

From a professional research perspective, there is a significant difference between causation and correlation. Their video and chart strongly imply that the drop in income tax rates actually caused the unemployment rate rise, yet it fails to provide any evidence to support this absurd claim. There isn’t even any documentation to support how the two measurements may even be correlated; further, they don’t even attempt to explain a correlation. Simply plopping two graph lines on top of each other does not qualify as legitimate research, and certainly does not prove a correlation or causation. Any claim derived from this amateurish effort is a pure fabrication and should be viewed as nothing less than political propaganda.

From a factual perspective, their representation of state income tax rates lacks full transparency. The chart used to support the video shows flat-tax income tax rates only, based on 2006 changes to the law. It does not mention that the 9.9% rate still remained on the books until 2011; and it fails to mention that the flat-tax was merely an “option” for anyone to choose. And they also neglected to mention that upon choosing the flat-tax option that personal exemptions or deductions would be limited; meaning that the effective top tax rate was not reduced by as much as they try to make it appear.

The 2011 tax rate bill was a compromise that eliminated the flat-tax option, lowered the top tax rate, but also severely capped exemptions and deductions. This 2011 amendment was revenue neutral and was not a windfall for the wealthy. Some will pay more income taxes under this scenario, while others may pay less.

The Tax Equity group also willfully ignores the most significant factor that must be highlighted in any discussion about state unemployment trends … namely the great national recession that negatively impacted every state beginning around 2008. Further, the 5.99 percent top tax rate did not take effect until 2011, well after the Ocean State’s unemployment rate had spiked.

Finally, any credible claim must also take into account a more comprehensive statewide picture. As our Center’s Report Card on Rhode Island Competitiveness clearly showed, even with lower top income tax rates, Rhode Island’s overall Tax Burden and Business Climate categories still grade-out as an “F”. Their attempt to blame the drop in income tax rates for the lack of progress in creating jobs and economic growth in Rhode Island is completely and shamefully inaccurate. Only reductions in the broader tax indices, which would serve to improve our overall individual and business tax climate, can be fairly judged to have an impact on our state’s economy. A final note here: the Tax Equity’s group’s misguided desire to raise income tax rates would turn our State’s best tax grade – a “C” in Personal Income Tax Rate – back into an “F”. Raising the rate, as they propose, would leave Rhode Islanders in a worse position than prior to 2006, as the top rate would be raised back to 9.99 percent, but with current levels of severely restricted deductions.

Moving foward, there will be many legitimate issues and points-of-view to be debated in the public arena, but we encourage the media, public officials, and all citizens to demand a higher standard than the level of distortions put forth in this video and chart.

Mike Stenhouse is the CEO for the Rhode Island Center for Freedom and Prosperity, a non-partisan public policy thank-tank.

See the non-credible video and chart here … by Rhode Islander’s for Tax Equity

See a well-researched analysis of their “Tax-The-Rich” plan here … by our RI Center for Freedom & Prosperity

Task Force Launches Municipal Pension Reform Website

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Pension Data added for 1800+ Police and Fire Retirees for Central Falls, Warwick, East Providence, and Newport

FOR IMMEDIATE RELEASE: March 20, 2012

Providence, RI – As part of National Transparency Week, the Rhode Island Center for Freedom and Prosperity announced today the posting of new pension data on its popular transparency website, www.RIOpenGov.org . The site has also been reconfigured to host the work of its national Task Force on pension reform, as the debate about municipal pensions heats up in Rhode Island.

The previously announced Task Force, which will focus on the City of Cranston, has a stated goal of providing detailed research and analysis about the municipal pension crisis that may be useful to other localities in the Ocean State and across the country.

The RI Center for Freedom’s open government website has recently added multiple new modules:

* Cranston and Municipal Pension Home Pages; www.RIOpenGov.org/Cranston and www.RIOpenGov.org/municipal-pensions ,where research and analysis from the Task Force will be posted

* Interactive pension data from locally run retirement plans, including; 132 police and fire retirees from Central Falls, 880 retirees from Warwick, 206 from East Providence, and 177 from Newport. Cranston pension data for 426 retirees was previously posted.

The interactive data displays for these 1800+ local retirees complements the 26,598 state retiree records that were previously available to review on www.RIOpenGov.org/state-pensions.

The Cranston Municipal Pension Home Page includes multiple analysis of how Cranston police and fire retirees receive higher pension benefits than their statewide peers, as well as details of the generous Holiday Pay that Cranston retirees continue to receive at taxpayer expense.

The Municipal Pension Home Page includes links to all local retiree pension data displays, as well as general analysis of the overall local pension crisis.

The Task Force members, who will provide commentary and analysis and who may participate in statewide forums or committee hearings in the General Assembly, include Eileen Norcross of the Mercatus Center, Rich Danker of American Principles Project, Bob Williams of State Budget Solutions, and Mike Stenhouse from the RI Center for Freedom & Prosperity.

Additional bio information for Task Force members can be found on the Center’s website at www.RIFreedom.org/pension-reform.

For over 25 years, the Mercatus Center at George Mason University has been the world’s premier university source for market-oriented ideas-bridging the gap between academic ideas and real world problems. A 501(c)(3) tax-exempt organization located on George Mason University’s Arlington campus, Mercatus works to advance knowledge about how markets work to improve our lives by training graduate students, conducting research, and applying sound economics to offer solutions to society’s most pressing problems.

American Principles Project is a Washington-based 501(c)3 organization. Founded by Princeton Professor Robert George in 2009, last year it became the first public policy organization to sponsor a presidential debate, which was shown on CNN. APP works across three areas: economic policy, education, and Hispanic outreach. It’s economic initiatives are public employee pension reform and monetary policy reform. It has worked to promote awareness of the public pension crisis and proactive reform ideas.

State Budget Solutions, a non-partisan organization advocating for fundamental reform and REAL solutions to the state budget crises, is a non-partisan, positive, pro-reform, proactive organization that is anchored in fundamental-systemic solutions.

The Rhode Island Center for Freedom and Prosperity, a non-partisan public policy think tank, is the state’s leading free-enterprise advocacy organization. Firm in its belief that freedom is indispensable to citizens’ well-being and prosperity, the Center for Freedom’s mission is to restore competitiveness to Rhode Island through the advancement of market-based reform solutions.

All Cities and Towns May Already be in “Critical Status”

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COMMENTARY: by Mike Stenhouse and Rich Danker

The centerpiece of the governor’s proposed legislation to let municipalities’ independent pension plans suspend annual cost of living adjustments (COLA’s), includes a ‘60% critical status’ test that may be irrelevant. While we support the concept of providing “tools” to Rhode Island municipalities, the distinction of which localities are in crisis – and which are not – may be an unnecessary exercise.

According to a study published last November by Eileen Norcross, senior research fellow with the Mercatus Center at George Mason University and a member of the Rhode Island Center for Freedom and Prosperity’s national pension task force, the true scope of  the unfunded liabilities belonging to the 36 Rhode Island cities with their own pension plans is $6 billion rather than the reported $2.4 billion, if the more accurate “market value” or private-sector rate is utilized instead of the the less accurate “assumed” rate, commonly used by most government entities.

Utilizing private-sector valuation rates, the pension liability for EVERY locality in Rhode Island is funded below 60%, according to the Mercatus report. We question, therefore, why there should even be a “critical status” test in the legislation.

The table below, from the Mercatus Report, shows how the true scope of the unfunded liabilities, along with the related funding ratios, are dramatically altered depending on which rate is used. (for each city – compare column 5 with column 8; and compare column 4 with column 7)

Market Value of Municipal Pension Liabilities

How municipalities account for their pension liabilities is of significant importance. We all remember the public outrage when Enron and other corporations were exposed for conducting fraudulent accounting practices … and rightly so. But why should we be any less concerned about accounting malpractice when it comes to our public pensions?

Using a valuation rate that is more in-line with the private-sector, all municipalities in the Ocean State should be provided with the tools the Governor proposes, and we should spare ourselves the drama of picking and choosing qualifying and non-qualifying localities.

Rich Danker is the project director for economics at American Principles Project in Washington, D.C . Mike Stenhouse is the CEO for the Rhode Center for Freedom and Prosperity. Both are members of the Center’s national task force for pension reform in Rhode Island.

Meet one of the “rich” who may be driven out of RI

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Meet Jennifer Hushion. She’s one of the “rich” that some say we need to tax more. In our Center’s analysis of the ill-conceived “Tax The Rich” bill, we warned that not only would this tax harm our state’s fragile economy, but would also drive people, like Jennifer and her family, out of the Ocean State.

Read Jennifer’s story here …

Read our Center’s tax analysis here …

When your government taxes people to the point where they are forced to emigrate to other state, our economic liberties are encroached.

OceanStateCurrent.com

JUST LAUNCHED! The Ocean State Current is now live!

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Visit The Ocean State Current – our Center’s new News Bureau – at www.OceanStateCurrent.com

February 28, 2012

Providence, RI — The Rhode Island Center for Freedom and Prosperity today launched its independent, nonpartisan news bureau, The Ocean State Current, which can be accessed at www.OceanStateCurrent.com. “The Current seeks to integrate with the existing community of local news providers in all media in such a way as to find stories and convey perspectives that might otherwise be overlooked,” writes Managing Editor Justin Katz on the site’s “About the Current” page.

The Center anticipates that Katz will become a familiar face throughout Rhode Island, as he covers events, investigates government actions, analyzes policies, and interviews not only public figures, but also Rhode Islanders with interesting stories to tell.

“Justin’s experience finding innovative ways to use the Internet to disseminate and debate issues of public concern makes him the ideal person for this role,” said Center for Freedom CEO Mike Stenhouse.

Although their relationship is one of funding and mutual support, the Current will enjoy wide latitude for independence from the Center. “We look forward to co-operating with Justin as we seek to expand the information available to Rhode Islanders,” Stenhouse said. Added Katz, “I began by self-publishing and building my own forums, so I’m used to writing on my own terms. Happily, both the Center for Freedom and The Current advocate thinking for yourself and standing on principle.”

As one of the founding contributors to AnchorRising.com, Katz has grown a substantial audience for his policy analysis and political and social commentary. He has published regularly in such venues as the Providence Journal, National Review Online, and Rhode Island Catholic and was featured in Proud to Be Right: Voices of the Next Conservative Generation (HarperCollins, 2010), edited by Jonah Goldberg.

“I definitely have a point of view,” said Katz, “but for the core content of The Current, I intend to pull it back to where it will only enable me to ask questions and follow leads that others might not consider.”

Topics likely to be covered on The Ocean State Current include:

* Capitol Hill legislation and related issues

* State budget and spending

* Education reform

* Human interest and other public policy stories

The Current’s website can be found at http://www.oceanstatecurrent.com/ .

RELATED MEDIA COVERAGE:

The Providence Phoenix:  Conservative Think Tank to Launch Journalism Project

Providence Business News – Conservative think tank to launch website

Providence Journal – Anchor Rising blogger to head think-tank news website

GoLocalProv.org – Conservative Think Tank Launching Journalism Site

 

Tax the Rich Schemes Don't Work

Tax-the-Rich Proposal Contradicts Itself

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Income Tax Hike on Wealthy would Cost Jobs and Fall Short of its Goal

Download a PDF of the Policy Analysis here … 

Background: In February 2012, a bill was submitted in the Rhode Island House of Representatives that would raise income taxes on individuals making over $250,000 in order to raise $118 million for social safety net programs. The bill includes a provision that the income tax hikes on the wealthiest Rhode Islanders would be temporary, in that those taxes would be gradually reduced as the unemployment rate drops. This concept is a contradiction in itself. Additionally, the bill would be poor public policy for our state, and the bill would not achieve its stated goal.

Analysis: Given the Ocean State’s fragile economy, any rise in taxes will put downward pressure on economic activity and will tend to raise the unemployment rate. A tax plan that is contingent on a decrease in the unemployment rate, but which itself serves to increase the unemployment rate, is contradictory and counter-productive.

An analysis by RI-STAMP (an economic modeling tool utilized by our RI Center for Freedom & Prosperity) of this proposal to raise income taxes by 4% on Rhode Islanders with the highest incomes, is projected to yield the following results and unintended consequences [1]:

• $13 million less than the $118 million in state tax receipts anticipated (or $105 million net)

• Loss of 1,372 jobs, increasing the unemployment rate by about ? of 1% (see Report Card reference)

• Loss of about 1,000 residents (0.09%, see Report Card reference)

Explanation: As with the laws of physics, economic laws are not easily changed by public policy. When something is taxed, it costs more, and the result will be less of it.

This is a common and fundamental miscalculation when it comes to projecting the effects of tax policy on tax receipts. Too often, the more short-sighted and simplistic “static”, or straight-line, calculation is utilized, when in reality the more complex “dynamic” impact should be evaluated. The downstream, ripple effects of tax policy on various aspects of the economy are rarely discussed or attempted to be quantified, either at the state or municipal level. RI-STAMP seeks to fill this void.

In summary, this tax hike plan will not reach its intended goal, as lower revenues will be realized and the state’s tax base will be reduced, while at the same time increasing the number of people who will qualify for or request aid.

Rhode Island’s Competitive Status: Other proposals to tax the rich have also been floated in the state, most with the aim of raising enough new revenues to fund planned spending levels.

The stated position of the RI Center for Freedom is that balancing the budget is the wrong goal for the Ocean State.

Seeking to balance the budget tacitly approves the current budget, and signifies that current spending and tax levels are effective for our state … they are not. The Competitiveness Report Card recently published by our Center illustrates how broadly non-competitive Rhode Island has become as compared with our New England neighbors and nationally.

The Ocean State’s tax burden and overall business climate already grade out at “F” … any increase in the income tax, would make this dire situation even worse.

In fact, in the area of ‘Personal Income Tax Rates’, Rhode Island currently grades a “C”; one of only two areas in the entire Tax Burden category that is not an “F”. By raising the income tax as proposed, this area would itself become an “F”, worsening our already dismal competitive standing … and imposing yet another stigma on Rhode Island as an excessively high tax state, even by New England standards.

In the sub-categories of Population Growth and Net Domestic Migration, Rhode Island also grades “F”. Our state cannot afford to lose more population by driving or keeping people out due to a higher income tax.

This kind of incremental tax-hike thinking, repeatedly over the recent decades, is what has steadily degraded the Ocean State’s ability to compete for the human and capital resources that are required to reinvigorate and grow our economy.

The message from this tax increase would be clear to businesses and individuals who have the mobility to move to or settle in other states … Rhode Island imposes a hostile level of taxes.

Alternative Recommendation: If instead, we would prefer to hang a “welcome” sign, the State must find the courage to cut taxes … and to cut spending. This is the best way to improve our standing in New England. This alternative line of thinking can help reverse the outflow of people and money from our state, and will help us attract the new investment in our state that is necessary to see our business sector expand so as to provide good jobs for our citizens.

Conclusion: A policy of tax “reduction” is consistent with an unemployment rate decrease. This proposed policy of tax “increase” is contradictory to it.

WHAT IS RI-STAMP?

Developed by the Beacon Hill Institute at Suffolk University, RI-STAMP is a customized, comprehensive model of the RI state economy, designed to capture the principal effects of city tax changes on that economy. In general STAMP is a five-year dynamic computable general equilibrium (CGE) tax model. As such, it provides a mathematical description of the economic relationships among producers, households, government and the rest of the world. It is general in the sense that it takes all the important markets and flows into account. It is an equilibrium model because it assumes that demand equals supply in every market (goods and services, labor and capital); this is achieved by allowing prices to adjust within the model (i.e., prices are endogenous). The model is computable because it can be used to generate numeric solutions to concrete policy and tax changes, with the help of a computer. And it is a tax model because it pays particular attention to identifying the role played by different taxes [2].

End Notes

 [1] The RI-STAMP model does not break out incomes at the “$250,000 and higher” level. We determined it would be a more accurate simulation to project the impact of a general $118 million income tax increase, in lieu of a 4% raise on the model’s “$125,000 and higher” level.

[2]  The Beacon Hill Institute, What Is STAMP?; http://www.beaconhill.org/STAMP-Method/STAMP.pdf

Media Event: Report Cards passed out today at Statehouse

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MEDIA EVENT

WHAT:    State Report Cards Handed Out
WHEN:    Thursday, February 16, 3pm-4pm
WHERE:  RI Statehouse Rotunda

Providence, RI — Legislators, staffers, and passers-by will have their competitiveness report cards handed out to them this afternoon at the Statehouse, but it is doubtful that many will want to take them home, as the Ocean State has graded 28 Fs, 11 Ds, 9 Cs, and just 1 A.

The Rhode Island Center for Freedom and Prosperity, which released the Report Card on Rhode Island Competitiveness on Tuesday, will be at the Capitol from 3pm-4pm this afternoon (Thursday) handing out hard-copies. The media is invited to attend to talk to citizens as they receive their report cards, or to ask questions of the Center’s CEO, Mike Stenhouse. The public is also welcome to attend and receive a copy.

 “This dismal report card represents a general failure, both on behalf of legislators who have allowed our tax and regulatory structure to become so utterly non-competitive with our neighboring states, and on behalf of voters who have been asleep at the switch”, said Stenhouse. “There has been a very strong response to the report card from citizens, advocacy groups, and even from the RI-GOP, which chose to include our report card at their recent press conference as evidence of the decrepit state our economy. I think it will be interesting to see how some of our citizens react.”

The complete report card, with data sources and notes, can be downloaded from the Center’s website at http://www.rifreedom.org/2012/02/rhody-fails-report-card/  .

***

The Rhode Island Center for Freedom and Prosperity is the state’s leading free-enterprise public policy think tank. Non-partisan, yet firm in its belief that freedom is indispensable to citizens’ well-being and prosperity, the Center for Freedom’s mission is to restore competitiveness to Rhode Island through the advancement of market-based reform solutions.

The Report Card was reviewed and edited by nationally renowned economist, Scott Moody, who will not be on hand at today’s event.