September 17, 2009

A Burning Ring of Revenue Fire

Justin Katz

One thing to remember: Every time you read about state tax revenue lagging expectations, the expectations have likely already been downgraded since the last time analysts were disappointed:

Two reports issued Tuesday afternoon by the state Revenue Analysis Office showed total state revenue in July and August was down 4.2 percent from the same two months last year, after adjusting for money collected in one year that is accounted for in the previous year.

Besides trailing last year, the revenues for July and August also trailed what state budgeters projected would come in. The shortfall is $12.8 million or 3.3 percent.

I don't know if we can afford to wait until the next election to replace the legislators who've brought us to this impasse. Here's a fantastic, small-scale example of the incompetence at work:

The cigarette tax collection is trickier to figure out.

The amount of money taken in during July and August is ahead of last year, $23.5 million compared with $20.5 million. But that is far less than what lawmakers budgeted: $26.3 million.

They looked for the increase because the state raised the cigarette tax by a dollar — to $3.46 a pack — in April, toward the end of the last budget year.

Simmons said that budget makers may have underestimated how much the tax hike would decrease consumption of cigarettes that are taxed in Rhode Island.

So, the legislators increased this tax 40% in the hopes of increasing revenue 28%, and thus far they've realized 15%. During the summer, when smoking tourists are trapped and aren't likely to waste their valuable vacation time searching for deals across the border (or quit altogether).

The governor's staff proposed this particular tax hike, and one hopes they're duly embarrassed. Ultimately, however, the budget was reconfigured in the General Assembly's name.

Whoever's to blame, anybody looking for an economic turnaround in Rhode Island shouldn't put their chips on the table until well after just about every other state in America has already been humming along for quite some time.

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.

"budget makers may have underestimated how much the tax hike would decrease consumption of cigarettes"

Dammit, we need people to smoke and get cancer so we can balance the budget!

Posted by: Monique at September 17, 2009 7:27 AM

I wish the General Assembly would realize sooner rather than later that one cannot squeeze blood from a stone.

Posted by: Dan at September 17, 2009 8:17 AM

"budget makers may have underestimated how much the tax hike would decrease consumption of cigarettes"

It may not have decreased the consumption of cigarettes as much as it decreased the consumption of cigarettes purchased in Rhode Island.

As with gasoline, Massachusetts is a mere moment away for those frustrated by the General ASSembly and their foolish behavior.

Posted by: John at September 17, 2009 9:05 AM

Yet another reason that I keep yelling to everyone who won't listen that RI should drop all of its tax rates to just below MA (MA is already below CT) and watch the tax revenues rise. MA just raised their sales tax rate to 6.25%. A coincidence that it is just a hair under RI's 7-8% sales tax? Hell no. Drop ours to 5% and all those MA residents on the borders will start shopping in RI, instead of the other way around. All those businesses in Seekonk and Attleboro will look to open shop in Woonsocket, Cumberland, Pawtucket and East Providence.

But hey, why be proactive?

Posted by: Patrick at September 17, 2009 10:20 AM

Patrick, the progressives in this state believe that competition has next to no value and that any appeal to market forces is "libertarian pixie dust." Their self-satisfied laughter and anti-intellectual ridicule will drown you out before you complete your first sentence.

Posted by: Dan at September 17, 2009 10:55 AM

Dan, you're right. Hence, I no longer even visit RIF for even the page views or the chuckles.

Posted by: Pat at September 17, 2009 12:32 PM

No more studies, cut spending, period!

Posted by: kathy at September 17, 2009 4:43 PM
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