May 6, 2008

RI Revenues Down Again

Carroll Andrew Morse

Steve Peoples of the Projo reports that Rhode Island's economic condition is amongst the region's and the nation's worst...

Economists reported last week that Rhode Island is one of nine states across the country and the only one in New England experiencing an economic recession. State Tax Administrator David M. Sullivan supplied data yesterday detailing the effect of widespread job losses, stagnant wages and weak consumer confidence.

Sales tax collections are down $23 million, or 3.1 percent, compared with the same period last year, Sullivan reported, while income tax revenue is down $9 million, or 1 percent. Should the trend continue through the end of the fiscal year in June, as expected, it would be the first time that the state’s largest two revenue sources collectively fell since the early 1990s.

Comments, although monitored, are not necessarily representative of the views Anchor Rising's contributors or approved by them. We reserve the right to delete or modify comments for any reason.

Sales Tax revenue is down?! How can that be? It's not like we're just minutes away from two other states with lower tax rates...

...oh wait...

Posted by: Greg at May 6, 2008 12:00 PM

The info on shrinking tax receipts was predictable given Justin's demographic research here:

Because we have replaced around 29,000 people from above 3x FPL (about $60k in household income) with 25,000 below that threshhold, the tax receipts should follow that. And it did.

Above $60k in earnings, a household is likely to be paying more in taxes than they are consuming in public services. The inverse will also be true.

My only skepticism with the original research was that tax receipts had not reflected the trend. Today's front page of the Projo removes any doubt.

"Holding the line" on taxes, when we are clearly chasing taxpayers out will simply preserve this outbound trend.

Posted by: Roland at May 6, 2008 1:16 PM

I'm not going to hold my breath waiting for press releases from the Poverty Institute, Ocean State Action, NEA, AFSCME, AFT, etc., offering their commentary on these data, much less their solutions to the underlying problems.

With Massachussets adding both jobs and tax revenue (up 17%!), it's pretty hard to say it's due to the overall economy turning down, or New England being worse hit than the rest of the country. As Ed Achorn noted today, this is nothing more or less than the Democratic majority in the General Assembly reaping the results of the policies it has enacted during the 70 plus years it has controlled the state.

And now, as many have prediced, the May REC will conclude that the actual budget deficit facing the state (to say nothing of its public sector pensions and healthcare benefits funding deficits) is much larger than previously estimated.

The end game has been underway for some time, and is now approaching another crunch time. It is only a matter of time before the rating agencies downgrade RI's debt and raise its borrowing costs. At best, the outmigration of middle class and affluent taxpayers (i.e., those who pay income taxes to the state -- unlike rich people who simply buy vacation homes here)has been slowed by their inability to sell their houses. At worst, it will acclerate, with people accepting a loss of housing equity as the price they have to pay to escape the fiscal trainwreck underway here (not to mention our poorly performing public schools -- e.g., compared to the scores generated in next door Massachusetts).

I'm still looking forward to the final surprise -- I'm betting on a large sale of public assets to fund the public sector pensions, so that the boys and girls who have been in on the game for the longest time can take theirs and exit stage south to live happily ever after in Florida, where they can watch Liz Roberts, Karen Malcolm, David Seagal, Kate Brewster, Elizabeth Burke Bryant, Matt Jerzyk, and all the other progressives try to sort out the mess that's left behind.

Anybody who knows the main characters in this sad saga knows that they have to have one last fast one up their sleeves -- it's a foregone conclusion that they're not going down easily (just ask the Federal prosecutors).

Still, I admit to a morbid fascination with how this slow motion train wreck is going to play out over the next month.

Posted by: John at May 6, 2008 1:49 PM

As someone posted on AR before, Rhode Island is "circling in the bowl" (or something to that effect - a great analogy).

As happens with matter as it circles downward, closer to the drain, this State's circling is accelerating due to the narrowing width of the bowl ... meaning that the final descent into the drain is nigh.

This flush into the drain of economic abyss comes as no surprise to anyone who has been observing the General Assembly's decades of political corruption, special interest pandering and resulting fiscal mismanagement.

There is a certain poetic justice to it all - nobody can say that as a State we didn't ask for it. The injustice comes in that those of us who have tried to speak out and change this State will suffer along with everyone else.

Posted by: Tom W at May 6, 2008 4:21 PM

Democracy is the theory that the common people know what they want, and deserve to get it good and hard.

H. L. Mencken

He must have had RI in mind.

Posted by: chuckR at May 6, 2008 4:44 PM


You might add a further injustice to your list, or perhaps just another example of why we're in the state we're in: look at the way the leaders of both factions in the RI Democratic party have treated their critics over the years -- rather than addressing the facts and arguments, they have systematically tried to destroy them and force them to leave RI (or, alternatively, called off their attacks when critics agreed to stay within certain manageable bounds -- e.g., compare the way Gary Sasse and Steve Laffey or Ed Achorn or Val Forti or Justin or Bill Felkner or you have been treated).

That the people who brought all this down on the state will suffer too is precious little compensation for what they have wrought.

Posted by: John at May 6, 2008 4:58 PM

Amen, Chuck!

Of course, the "solution" you'll hear from them is raise more taxes! It's not likely people might change their behavior and look for ways not to get taxed at onerous rates. Oh wait, they already are. Except for property taxes in the Boston metro area, most of Massachusetts is a relative tax bargain in nearly every respect compared to Rhode Island. Get that? "Taxachusetts" is now a bargain. Perhaps we should introduce our liberal friends to the Laffer Curve (which I noticed Ed Achorn mentioned today). There's a certain point at which people just say "enough" ... from the way things are going it may come even sooner than I thought.

One thing that was missing from the Projo article was the dollar amount that revenues are expected to fall short by. From what I understand from several different, but complementary sources, when the revised numbers are announced on the 9th, it will be anywhere from a best-case scenario of $40 million to a really worst-case scenario of up to $100 million off (this would be in addition to the figure approved in the recent supplemental budget). But hey, it's not like it's real money anyway. My guess: $75 million ... but that's just my opinion. Any other takers? Do I hear $80 million? ;)

Why do you think the House and Senate flew through the supplemental budget so quickly? ... because they know they're going to have to do some more cutting very quickly (the current FY ends June 30th), and when you know you have to do that, it only makes sense to do more sooner, to make what you're going to have to do later a little easier. Trust me, they're already looking for more. I certainly don't envy Rep. Constantino. I don't think the Dems are stupid enough to raise income or sales taxes in an election year, but you never know with them. Of course, the gov wouldn't go along with a big tax increase, so it would have to pass over a veto.

This is going to be a very interesting few months ahead.

Posted by: Will at May 6, 2008 5:09 PM

Excellent comments above.
To quote Osama's pastor-
"the chickens are coming home----------to roost"

Posted by: Mike at May 6, 2008 7:32 PM

I also heard that lottery revenues are up 14%.I worked at Lincoln Park for a few years.I noticed that the degenerate gamblers would play on cash advances from their credit cards.That's a ticking financial time bomb right there.A cash advance is like going to loan sharks minus the leg-breakers.

Posted by: joe bernstein at May 6, 2008 11:31 PM
Post a comment

Remember personal info?

Important note: The text "http:" cannot appear anywhere in your comment.