December 30, 2005

The Best Place to Start a Business that Serves Rhode Islanders is Probably Attleboro or Seekonk

Carroll Andrew Morse

I often think of Massachusetts (my home for 20 years) and Rhode Island as very similar places in terms of government and political and social culture. However, a study conducted by The Beacon Hill Institute at Suffolk University noted by Jack Perry on the Projo’s 9-to-5 blog says otherwise.

According to the study, Rhode Island rates 41st in the nation in economic competitiveness while Massachusetts rates 1st. Rhode Island’s poor ranking comes from it position amongst the worst 5 states in the categories titled “government and fiscal policy”, “business incubation”, “openness”, and “environmental policy”.

Do we have a clue here as to why Rhode Island is facing a $60,000,000 shortfall while Massachusetts is running a surplus?

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Why are we in such a mess? The Channel 10 article states:

"Democratic leaders of the General Assembly also are looking at tax and education reforms, but they say Massachusetts' flat tax benefits the wealthy at the expense of middle-class and working families.
House Majority Leader Gordon Fox said he didn't want to continuously try to outdo Massachusetts with tax cuts. 'Massachusetts is a much bigger state with more resources,' he said."

Translation: Mass. may be in much better shape, but we certainly shouldn't take that road! Let's continue with our tax-and-spend policies and see if things change. Let's increase taxes on those who invest in our economy. And how about we raise the minimum wage?

Ugh! As long as we continue to vote power to the likes of Gordon Fox, things won't change.

Posted by: rightri at December 30, 2005 8:41 PM

Good post. What is quite scary is that according to this report, RI in 1995 and in 2003 ranked 21st and 22nd respectively in competiveness and now in 2005, we have dropped dramatically to 41st. Our gov/fiscal index is 45th (driven by being ranked 47th on state/local taxes), and our business incubation index is also ranked 45th. I am getting afraid that RI is starting to spiral downward ... no new businesses, and higher taxes (going hand in hand) will eventually lead to disaster. I hope we see something new at the state house. I don't want to move my junkyard business to Attleboro.

Posted by: Fred Sanford at December 30, 2005 11:47 PM

As a resident of East Providence, I totally agree with this post. In the last several years, our city has actually had a decline in population (as has the state, too). We have a whopping total of FOUR restaurants left in a city with well over 45,000 people in it. Where do you think we all go to eat? Seekonk. Thank you 8% meals tax for helping to finish off what our otherwise high levels of taxation (property, income) got started.

Quick math quiz: What's 8% of zero? Oh right, zero. We will get there soon enough, if nothing changes.

Worse yet, we know that the decline in population in E.P. doesn't just mean that those people aren't just moving out of the city. In many cases, they are just going over the border, to places like Seekonk, Rehoboth, Swansea, etc. The services are similar, the access to stores and other amenities is better, there are generally low crime rates, and in general, overall taxation is lower. A 5% sales tax rate just seals the deal. Gas is even cheaper!

When people in Rhode Island are fleeing to Massachusetts as a "tax haven," you have to know that we are in trouble. No one calls it "Taxachusetts" anymore.

Poverty pimps like Fox and his ilk want to keep up the chirade that they are for the little guy, when in fact, the policies that they keep in place make our state less competitive, which over time, reduces revenue, creates a "jobs deficit" and weakens the tax base, thus objectively raising taxation for all who remain here.

Fun example: Would you rather have a 100 rich people paying 25% (for easy math, make that dollars = $25.00) on something, or a 1000 rich people paying 10% ($10.00)? Let's see 100 X 25 = 2500 or 1000 X 10 = 10000. Which one is bigger? In Fox's world, because by my example more rich people will want to be here as a result of the lower rate, the rich guy is getting a "break," even though actual revenue increases four-fold. If you lower rates, more people want to be here. The deeper your tax base, the more you'll be able to spread it out in order to get the same level of revenue. I really sometimes wonder what parallel universe I'm living in!

Posted by: Will at December 31, 2005 1:42 AM

Why does this not surprise me. RI is always at the bottom of most economic studies.

More interesting is that MA's legislature is controlled by Democrats and there is not a single Republican in its congressional delegation. This is an interesting discussion point. Is MA's status solely because of the recent history of Republican governors? Are MA Democrats doing a good job? Or is the study biased to favor MA based on the weighted criteria?

MA still faces slowth growth and population loss, so it's ranking at the very top is surprising.

Posted by: Anthony at December 31, 2005 10:04 AM

Here is why no one with any choice would live in Rhode Island when they could live in Massachusetts:

I know a business executive whose 2005 state income liability in Rhode Island was $50,000. If she had lived in Massachusetts, it would have been $30,000.

Plus, you can add an additional tax burden for this executive of nearly $10,000/year for higher property taxes in Rhode Island versus comparably priced homes in Massachusetts.

All those extra taxes - for worse public schools and worse public services across the board versus Massachusetts.

Now, some people will twist this into a class warfare story - and focus on soaking the rich.

For all those philosophical types, consider this:

That business executive has sufficient control to influence a corporate relocation. She could start and build or even move and build companies in Rhode Island. That means lots of jobs at all sorts of salary ranges across the economic spectrum. That could bring additional people into the state, who also would pay taxes.

And, it will never happen because the economic penalty from high taxation in Rhode Island is so severe and the education penalty to all our children from lousy public schools is equally high in this state.

It also an independently confirmed economic fact that the tax burden on retirees in Rhode Island is severe, which means they have an incentive to move elsewhere. Did you see the cover story in yesterday's USA Today which talked about how certain states offer tax advantages to retirees who relocate there?

What I will never understand is why more people are not outraged about the tax burden in this state.

Posted by: Anonymous at December 31, 2005 12:31 PM

Will, I couldn't agree with you more.

Anonymous, one of the reasons that not enough people are outraged about the tax burden is that many Rhode Islanders either benefit or have a family member that benefits from the status quo.

The State of RI is the largest employer in the RI and both the federal government and local governments employ a fairly sizable number of people. Ask Fred Sanford. He knows he'll be able to retire after working 20 years with a full pension from the state and get cost-of-living adjustments, too. You can't do that in the private sector anymore. Just look at the folks from UAW in Detroit. They strangled the auto industry to a point where now UAW members won't even have jobs, much less life-time pensions.

Will is right. Eventually, the tax base will shrink to the point where RI will have to make substantive changes or it will develop a service sector economy to support hose individuals who work in Boston but live in Rhode Island for the relatively cheaper cost of living.

By voting for Democrats, that's what the people of RI have chosen. The City of Providence offers tax breaks to artists, not to companies that employ dozens of employees.

There is no good reason to start a company in RI unless.

Posted by: Anthony at January 1, 2006 4:39 PM

Will and Anthony,

We will never have a change in Rhode Island legislation which will favor the REAL working people in Rhode Island until we have some Morals in the Legislator. Adam and Eve not Adam and STEVE. Enough said the RHODE ISLAND legislator is like Sodom and Gomorrah. And Providence is like the city of Babylon. We have let the immoral run our government due to Political correctness for to long. I live in Rhode Island due to the fact is I like being a Rhode Islander. Maybe we need to elect Real Republicans which will act like John Bolton does in the UN. Tell it like it is and if the immoral do not like it they can go back in the closet.

Posted by: Fred on the Blog at January 1, 2006 7:37 PM

One reason why we consistently fail with people like Fox is that we rely on REASON.

Fox and the other Democrat sychophants for the welfare lobby will never alter their policies based upon facts or common sense, for to them it is all about ideology. In their world everyone being poor but equal is a superior outcome than (much) higher average standards of living, albeit with differentials in distribution (a/k/a wealth).

So our arguments concerning increased state revenue via lower income tax rates, improved economic opportunity by making RI hospitable for business and the American Dream fall upon deaf ears.

The solution is to drive RI Democrats from office. For this the RIGOP must to drumbeat the message that the Democratic Party is now AGAINST "working families" but instead is captive to public sector unions and the welfare lobby, i.e., those who feed off of the paychecks of "working families."

However, I'm not holding my breath awaiting for the RIGOP to take on the Democrats - the party seems to be controlled by Neville Chamberlain-ish appeasers.

Posted by: Tom W at January 1, 2006 8:54 PM

Tom W

I guess that leaves me one option I will have to take on the general assembly by myself. Let's see Victor Moffit is my rep and Senator Rapitak or something like that is my Democratic senator. Tom What do you think our team can do?????????????

Posted by: Fred on the Blog at January 1, 2006 9:47 PM

Fred on the Blog:

>>Tom What do you think our team can do?????????????

First, stand for something. What does the RIGOP stand for??? What are its principles and goals???

A registered Republican in RI couldn't tell you / us, much less the "average man on the street."

As did Reagan, wrap the party under the mantle of the American Dream and the optimism inherent in it. In turn, this means inclusion of "working families" (remember "Reagan Democrats"?).

The RIGOP could be:

1) The party of jobs (By making "RI attractive to employers, not lawyers." More employers = more jobs = a brighter future and higher wages for working families").

2) The party of education. (Every parent wants their children to have a better life than their parents. This is the heart of the upward mobility that is the American Dream, and which made this country great. Therefore we want, no demand, that working families' children have an opportunity to receive a world-class education. Therefore schools should be run for the benefit of parents and students, not the teachers unions. We propose providing all parents vouchers that they can use in public or private schools, so that parents can enroll their children in the school that the parents feel is best.")

3) The party that stands for WORKING people. ("The public pays to provide an education for all children. This is the means by which no one born into poverty need stay there. Therefore the presumption should be that every able-bodied adult should be working and self-supporting. Therefore we support reforming RI's social benefits [welfare] to those who have received a high school diploma or GED, and then for a limited period of time. If someone drops out of high school, and therefore declines to take advantage of the free education that the public has offered them, then the public owes them nothing more.")

Then the RIGOP should consistently and repeatedly label the RI Democrats as the "political party wholly bought and paid for by the special interests of unions, trial lawyers and the welfare lobby" ... while "RI Republicans stand for those who work, behave responsibly, obey the law and just want a fair shake and for their children to be able get a good education and a good job right here in Rhode Island."

Of course, this would require the RIGOP to grow a backbone, be willing the confront the Democrats, and be ready to endure their wrath and the inevitable accusations of mean-spiritedness, etc.

Theoretically possible but, like Lincoln Chafee, it appears that the party establishment essentially believes in the same things that that Democrats do, albeit not quite as zealously. So, e.g., they believe that we should perhaps not spend quite so much on welfare as the Democrats, but don't question why welfare should even be a government activity in the first place.

The RIGOP is Rockefellers, not Reagans - and so long as this is the case RI "working family" voters will have no particular reason to change horses.

Posted by: Tom W at January 1, 2006 10:36 PM

Fred & Tom,

I'm afraid if you hold your breath waiting for the RIGOP to become the "party of the working people," you shall end up as blue as a smurf!

We are making some progress in moving the party back towards the successful Reagan model and away from the elitist Rockfeller one. However, it's not something that will happen overnight. It can happen over time. Think of the party as a large ship. Our job as conservatives is to move the rudder that steers the ship little by little (to the right, of course), so that it will avoid hitting the iceberg.

One thing we can't do is become disengaged or leave the party altogether, otherwise the terrorists will have won. Um, I mean the liberals that want to refine our party will have succeeded. As Reagan said: It can be done!

Posted by: Will at January 2, 2006 2:08 AM

Tom W offers some interesting thoughts, things we can all agree on. But it seems the RIGOP believes if it just says these things enough, people will believe it and vote for them. The so-called "Reagan model" worked for governance, applied once he was elected; America had been desperate for change after the disastrous Carter administration.

In RI we need to look for ways to elect more Republicans first. The best model for such a change is Gingrich's Contract with America. The RIGOP can't just say, we are pro-education or we are pro-business. They need to come up with a contract that addresses specific problems and offers a list of simply-worded ways to correct them. "During the first 100 days in office, Republican legislators will..." Have GOP candidates sign it, and get it into the hands of every RI voter...2 or 3 times. Use it in television and newspaper ads, encourage every candidate to use it as debate talking points. Finally show voters what RI Republicans stand for, not just the opposition to elect when Dems screw up.

Even if Republicans increase their numbers by just 1 or 2, they follow the model. Introduce the legislation, highly publicize it. Show the voters they mean what they promise. I hear too many Republicans say "it will never pass" or offer watered down legislation in hope Dems will consider it. Forget it! With such a small minority, Republicans should stop trying to be players and just do what they think is right.

With Governor Carcieri's popularity, he could lead the charge, so now it the best time. I want Republicans who will promise to eliminate the restaurant tax and reduce the sales tax to 5%, and will be willing to cut state spending to do it. Most RIers want this, Carcieri wants this, so why aren't GOPers screaming it?

Posted by: rightri at January 2, 2006 10:53 AM

I don't think you will find many RI Republicans, moderate or conservative, disagreeing with the need to make our state more economically competitive.

Most of the divide between the moderate and conservative wings of the party is over social, not economic issues. People forget that while Chafee opposed Bush's tax cuts, he also spoke Clinton's tax increases and ran the most economcially successful city in Rhode Island.

While people talk about Providence's 'renaissance' or Cranston's 'comeback' they overlook that Warwick has been the best run city in RI for the past 25 years--strong, consistent growth, fairly low taxes, etc. And it happened through the expansion of the tax base, not through repeated tax increases or blowhard leadership(sorry, Buddy and Steve). Strangely, Woonsocket is another city that has become economically viable without tax increases.

I know this seems like ancient history to people who started following RI politics after 2000, but it's the truth.

Tom, you may be right in asserting that there is a difference of degrees. I believe that welfare should exist as a government function. I think most Republicans would agree. What I'm opposed to is the abuse of welfare programs.

Funny though, RI's biggest problem isn't with welfare per se, but with spending on healthcare. We subsidize state healthcare to a point that is unsustainable and causes EMPLOYED low income workers to drop out of company healthcare plans. That leaves a smaller pool of employees footing the bill for everyone else. The state is competing against the private sector resulting in both increased healthcare premiums (as a result of the smaller pool) and higher taxes (to pay for government healthcare) for middle class Rhode Islanders.

You wonder why we're facing a shortfall and other states aren't? One word: healthcare.

Carcieri realizes this and is taking steps to change it. It's just difficult to do when you can't sustain a veto in either the House or the Senate. Fred, you don't need to be taking on Victor Moffitt for state rep. He is part of the solution, not the problem. We need more Republicans to run against Democrats, NOT to Republicans to run against the few Republicans who have proven that they can beat Democrats!

Look we don't need to be economically competitive with the South or the West. We just need to become economically competitive with MA and CT...and that shouldn't be too hard.

Posted by: Anthony at January 2, 2006 11:02 AM


"Fred, you don't need to be taking on Victor Moffitt for state rep. He is part of the solution, not the problem."

That is not my intention. I totally support Victor, he has the Right Ideas.


I think your idea of a contract with Rhode Islanders is the best Idea for change yet. And even if we don't win a majority still put in legislation and make the Democrats vote it down. And bring in the media like Reagan {Use the bully pulpit}

Posted by: Fred on the Blog at January 2, 2006 12:02 PM

Anthony -

I agree that my position on welfare may be too "extreme" for "most" Republicans. As libertarian leanging, I define "welfare" as any government subsidy of an individuals living expenses - including welfare in the sense most see it - but also Social Security, Medicare ... even the home interest deduction.

Once it becomes "legitimate" for government (using its coercive power) to take from one citizen(s) to benefit other citizen(s) we start on that slippery slope to collectivism (socialism, communism, fascism - they're all essentially the same). It also unduly empower politicians, who act as the middlemen, power-brokers and arbiters of this confiscation / redistribution.

RightRI -

Brilliant minds think alike! :)

I too have been a proponent of a "Contract with RI" - including a strategic / tactical dimension of "poison pills" for the Democrats that would simultaneously resonate with various Democrat constituencies (i.e., those who now assume that they support Democrats, but will switch with the proper education and incentive). Two examples:

Contract Item #1: The Lottery Promise Restoration Act. "The Democrats originally promised that the lottery / gambling revenue would be used for education and lowering property taxes. We Republicans will divert 100% of lottery / gambling proceeds out of the hands of the General Assembly, and distribute it, on a fair per capita basis, directly to each city and town." [Don't you think seniors would jump at the opportunity to have their property taxes greatly lowered, if not eliminated? Meanwhile, the Democrats would never sign-off on this ...]

2. Contract Item #2. The No Strikes By Teachers Act. The forty year experiment in allowing teachers to unionize has been a failure - educational quality hasn't improved, and our municipalities have had to endure acrimonious negotiations, work to rule slowdowns and even unlawful strikes. We Republicans will repeal the statute allowing public school teachers to unionize, so that teachers can be treated as real professionals rather than glorified shift workers, and RI parents need never again worry that the union bosses' will interfere with their childrens' education by calling strikes or work-to-rule labor actions." [Almost everyone in RI has come to hate the teachers unions, and with good reason. Yet the Democrats would never cross this core constituency and source of funds and campaign volunteers. So this "poison pill" would provide a real bright line difference between the parties.]

Posted by: Tom W at January 2, 2006 3:15 PM