Don't Scheme on Taxes, Simplify
Justin Katz
URI Economic Professor Edward Mazze's tax-cutting suggestions sound reasonable enough, but one can't help but be suspicious of the urge to control:
Murphy said of Mazze's plan, "I want to be open to it." Murphy said he was particularly interested in Mazze's proposal geared toward revitalizing local downtown business districts.
Murphy said he remembers a vibrant Main Street in West Warwick when he was a boy. "I know in the last 40 years, our Main Street in West Warwick has not come back to where it was," he said.
An article in the latest Sakonnet Times (not online) describes the Tiverton Town Council's approval of a suite of zoning changes for commercial districts, and the accompanying pictures present a similar longing for the downtown-style main street. But there are reasons other than zoning and the lack of targeted tax breaks that Main Streets have been disappearing. Some of them are cultural; some of them are economic; the point is that attempting to counteract these forces will come at an economic cost and may fail to produce viable businesses, anyway.
In other words, if pulling the Rhode Island economy back up the cliff is the objective, we shouldn't be layering all sorts of aesthetic preferences on pro-growth policies. We also should focus on simplicity. All of Mazze's proposals will benefit people savvy enough to know about the breaks, to take the proper steps, and fill out the proper forms, but big-government corruption and waste illustrate very well that the skill set for jumping through hoops is not necessarily an indicator of a successful business. "Targeted" tax cuts, in that sense, become targets for which people looking for breaks will shoot. We need to encourage people who are interested in running businesses.
As Roland Benjamin says:
"If [Rhode Island's] tax structure was reasonable in the first place, you wouldn't need [targeted tax breaks]."
And if Rhode Island's political and academic leaders were competent to manipulate an economic recovery, we wouldn't be in the mess that we're in.
I've said many times, one of the biggest changes they could make to the tax system is also one of the simplest. Drop the sales tax rate to 4%. The big box stores are all in MA in the border towns for a reason, to attract the RI traffic that has , until now, had a 2% less sales tax rate.
There's a reason these stores are in Attleboro and Seekonk and not EP, Cumberland, Pawtucket. People do prefer to pay less in sales taxes. So drop our sales tax rates and we'll immediately see an increase in sales at the Providence Place Mall, make the Warwick malls viable again and help other stores in RI at the same time, driving traffic away from the stores in MA and CT. So the next time a Best Buy, Home Depot, Lowe's is thinking of opening a new store, they'll look at RI. More revenue in sales taxes. More revenue in income taxes. Fewer people unemployed. It's win-win and simple. So simple even our General Assembly can't figure it out.
Last time I looked we're full of Home Depot's, Lowe's and Wal-Marts. I couldn't get a parking spot at Best Buy on Bald Hill Road last time I went-in August.
Bring back Main Street. Let the small business owner compete. I miss Salk's Hardware in Conimicut, Ben Franklin, Weintraubs, Woolworth and even Ann&Hope, especially at Christmas, because everybody knows that is where the real Santa was. The guy at the Outlet was just a helper.
Good point Mike, agreed. Best Buy, Lowe's or the one man shop down the street. Whoever. Though I have a feeling the small businesses are less affected by the tax differences than the big stores, as small businesses don't sell many items to the public that would make a big difference in price, due to sales tax. How many small businesses do sell $5,000 worth of cabinets or refrigerators or televisions? Yes, there are some, but I more get the feeling that if someone is going to support a local small business, they're going to do it regardless of that other 2-3% tax difference. It's more things like doing Christmas shopping where I avoid the Providence Place Mall and will hit the Emerald Square Mall instead, because of the tax differences when going on shopping trips. And I don't think I'm alone in that opinion either.
But to your point yes, whatever it takes to support the small business owners as well.
Mike and Patrick,
Ann & Hope is still in business. There are 2 stores in CT, 5 in MA and 3 in RI. Ann & Hope is operating like the old Apex Store except with more store fronts.
Tax breaks or lowering sales tax are not going to revive the community main streets of RI. Small business left main streets because cities and towns allowed large shopping malls to be constructed in the adjacent suburbs taking the shopping traffic away from main streets and small business.
That left small businesses one option left to survive, move to or near the large shopping malls.
In Warwick you have RI mall plus Warwick mall and look at the explosive growth along Bald Hill Road with all the small business strip malls (only problem I see is when I entered RI mall this September all the stores were boarded up and closed!). Driving Bald Hill Rd is as bad as driving RT-9 in Framingham or RT-1 into Boston, MA
You have the same scenario playing out all across RI. A shopping mall will be built only to be followed by strip malls with small business except in downtown Providence. Providence Place Mall which is up for sale by General Growth Properties closed down most of the mom and pop stores in downtown Providence by moving most of the shoppers into the mall off the city streets.
As business folded and downtown buildings became vacant the universities and colleges started buying them up for classroom and dorm space effectively taking them off the tax rolls. That’s one of the reasons why living in Providence is so expensive tax wise!
Woonsocket redevelopment spearheaded the new social flatlands and all the main street business flocked there leaving main street Woonsocket naked and void! Why? Plenty of parking for shoppers in the new social flatlands which is another problem affecting the main streets. Woonsocket is struggling to get tenant back on main street. Nobody walks anymore; most people want to park their car at the front door.
Main street business need people, shoppers, restaurants, parking, transportation infrastructure (RIPTA?), arts, entertainment venues and a safe environment to survive.
RI had a good thing going with the commercial historic tax credit which became a model to the rest of the states until Governor and General Assembly pulled the plug. For every $1 in tax credit $5 of in RI state economic activity was generated in the form of taxes, sales, wages, putting buildings back on tax rolls, creating low cost to luxury housing and small business spaces which was revitalizing the cities and towns.
Why are there so many shopping malls near the RI boarders in MA and CT? Because those states know if a carrot is dangled in front of RI RI will jump for it in sales purchases and taxes. If you compare the prices most are lower in CT and MA because cost of doing business is lower in rents, insurance, healthcare, utilities and wages.
What we should be talking about is NO sales tax and no income tax accompanied by a total remake of government so we don't need to tax sales and income and so we don't have to raise property taxes to make up the difference.
We have a spending problem. Tax schemes won't solve it. Only deep, deep spending cuts will foster a climate in which taxes can be competitive.
"We have a spending problem. Tax schemes won't solve it."
Exactly.
George,
An in-law of mine through marriage retired and moved to NH from MA. He can’t believe the taxes he has to pay!
Everyone keeps talking about how low NH taxes are however NH was ranked 4th in the nation per capita 2007 by The Tax Foundation for state and local property tax collections.
My relative can’t believe NH has an income tax on dividends and interest income and his property taxes are higher than what he was paying in MA because it depends on what city and town you live in let alone the addition of the school taxes, fire taxes, meal tax, communications tax and gross receipts tax.
Government has to find some way to pay for the services it provides to the general public. Government gives in one hand and takes with the other. The grass might not be really all that green on the other side of the fence but 2 things are for certain; taxes and death.
It took me close to 10 years to pick my retirement place depending on my individual family financial situation.
RI needs to address its tax problems and what it should be addressing is balancing its tax structure. It depends too heavily on property taxes and gambling. RI needs to put a lid on the General Fund and start more restricted receipts accounts. The General Fund is too much of an open cookie jar!
One of the reasons I left RI was because I could cut my in-state tax payments more than 50% by moving out of RI. State of RI and cities and towns provides about 99% no incentive for the retired to stay living in RI.
Each any every one of you still living in RI will grow old and maybe retire letting RI continue to stick it to you in taxes.
Ken wrote:
"One of the reasons I left RI was because I could cut my in-state tax payments more than 50% by moving out of RI."
Similarly, I just did the calculations on my personal situation. If I were to simply move to Seekonk or Swansea, I would save about $5,000 a year in taxes. Income taxes, property taxes, gas taxes, sales taxes. It all adds up. Anyone here in RI who would refuse an annual $5,000 handout? And the standard of living is exactly the same.
Patrick,
If you or anyone wants to get a sense and across the board look at taxes in the states as they apply to your current or future retirement income a great web site to look at is the following site:
Retirement Living Information Center:
http://www.retirementliving.com/
Be careful calculating the differences because individual circumstances are not taken into account only broad comparisons.
I moved from RI to HI. HI (10.6%) is ranked one of the top 10 highest locals by the referenced Tax Foundation verses RI at (10.2%) in paying income to state and local taxes.
However based on my individual family financial retirement income situation, living in Honolulu, HI a recognized international city and vacation destination is far better and cheaper than living in RI even though HI is ranked at a higher percentage than RI and Honolulu is a high cost living city behind Manhattan, NY and San Francisco.
My retirement income is totally exempt from State of HI state income tax (I only pay RI state income tax on that portion of retirement income coming from RI), plus my Social Security is exempted or not taxed in HI as RI taxes all Social Security income, there is no car, boat or motorcycle property tax in HI, my current total property tax is only $175.00 verses $2,700.00 for the same property value I had owned in Woonsocket, RI a year based on HI senior exemptions and discounts, there is no school; educational or fire tax, I have no New England winter heating bills to contend with (all though there is free snow plowing on the HI mountains tops), in HI lotteries and gambling is not allowed, yes every transaction except prescription drugs has a 4% excise tax (sales) on it but offsetting the 4% tax is give backs, healthcare insurance and regular insurance is lower in HI than RI, educational evening school courses are free, all beaches and beach parking are free with free restrooms, showers plus trash pickup and camping in city parks with permit is free (state parks $5) besides a nationally recognized public transit system that runs 24/7 all the islands ($2.25 one-way or senior pass $30 a year except on 1 island where it is free), parents must pay for individual child public school bussing if applicable ($0.75 one-way), local banks provide gasoline discounts up to 10%/gal to banking customers, free band concerts, ballet, symphonies and stage shows daily, free city sponsored movies on the beach, free weekly fireworks, and too many parades and block parties to attend over the course of the year all free; most all restaurants and business offer senior discounts (starting age 50 plus) up to 50% off besides the average year-round daily sunny temperature of 78 degrees eliminating two seasons of purchasing clothing (fall and winter). Yes it takes 5 hrs by jet to get to CA or 30 min max to get to another HI island but that’s a small price paid for living in paradise besides there are flight discounts offered and all telephone calls to the lower 48 mainland states are free; unlimited by local land-line telephone service.
HI is the 47th largest state by land mass but has 1 state government (Republican/Democrat balanced), 4 local counties seats with 4 mayors; 4 city councils and 1 school district with 1 school superintendent covering the whole state over 120 islands plus flying to another island for the weekend is like going to another state killing any island fever that might arise. The 4 major islands are ¾ land mass of RI to over 3 time larger the land mass of RI.
So when you start comparing, look at your financial status, present and future taxes, life style, sports and entertainment needs, educational need, business networking, cost of living, free amenities offered between locations and if you’re new location will be included as an international town or city location as it brings extra perks.
Most of all visit and spend vacations in your proposed retirement location. Meet and make friends with the locals that live there so you will have a better understanding of the taxes and environment.
What state you decide to live in, work in or move to is your own personal and/or family preference based on your needs, wants and quality of life.
By the way, living in Hawaii all your family members and friends want to visit you so make sure you have an extra bedroom!
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I've said many times, one of the biggest changes they could make to the tax system is also one of the simplest. Drop the sales tax rate to 4%. The big box stores are all in MA in the border towns for a reason, to attract the RI traffic that has , until now, had a 2% less sales tax rate.
There's a reason these stores are in Attleboro and Seekonk and not EP, Cumberland, Pawtucket. People do prefer to pay less in sales taxes. So drop our sales tax rates and we'll immediately see an increase in sales at the Providence Place Mall, make the Warwick malls viable again and help other stores in RI at the same time, driving traffic away from the stores in MA and CT. So the next time a Best Buy, Home Depot, Lowe's is thinking of opening a new store, they'll look at RI. More revenue in sales taxes. More revenue in income taxes. Fewer people unemployed. It's win-win and simple. So simple even our General Assembly can't figure it out.
Posted by: Patrick at December 7, 2009 9:21 AMLast time I looked we're full of Home Depot's, Lowe's and Wal-Marts. I couldn't get a parking spot at Best Buy on Bald Hill Road last time I went-in August.
Bring back Main Street. Let the small business owner compete. I miss Salk's Hardware in Conimicut, Ben Franklin, Weintraubs, Woolworth and even Ann&Hope, especially at Christmas, because everybody knows that is where the real Santa was. The guy at the Outlet was just a helper.
Posted by: michael at December 7, 2009 10:27 AMGood point Mike, agreed. Best Buy, Lowe's or the one man shop down the street. Whoever. Though I have a feeling the small businesses are less affected by the tax differences than the big stores, as small businesses don't sell many items to the public that would make a big difference in price, due to sales tax. How many small businesses do sell $5,000 worth of cabinets or refrigerators or televisions? Yes, there are some, but I more get the feeling that if someone is going to support a local small business, they're going to do it regardless of that other 2-3% tax difference. It's more things like doing Christmas shopping where I avoid the Providence Place Mall and will hit the Emerald Square Mall instead, because of the tax differences when going on shopping trips. And I don't think I'm alone in that opinion either.
But to your point yes, whatever it takes to support the small business owners as well.
Posted by: Patrick at December 7, 2009 11:42 AMMike and Patrick,
Ann & Hope is still in business. There are 2 stores in CT, 5 in MA and 3 in RI. Ann & Hope is operating like the old Apex Store except with more store fronts.
Tax breaks or lowering sales tax are not going to revive the community main streets of RI. Small business left main streets because cities and towns allowed large shopping malls to be constructed in the adjacent suburbs taking the shopping traffic away from main streets and small business.
That left small businesses one option left to survive, move to or near the large shopping malls.
In Warwick you have RI mall plus Warwick mall and look at the explosive growth along Bald Hill Road with all the small business strip malls (only problem I see is when I entered RI mall this September all the stores were boarded up and closed!). Driving Bald Hill Rd is as bad as driving RT-9 in Framingham or RT-1 into Boston, MA
You have the same scenario playing out all across RI. A shopping mall will be built only to be followed by strip malls with small business except in downtown Providence. Providence Place Mall which is up for sale by General Growth Properties closed down most of the mom and pop stores in downtown Providence by moving most of the shoppers into the mall off the city streets.
As business folded and downtown buildings became vacant the universities and colleges started buying them up for classroom and dorm space effectively taking them off the tax rolls. That’s one of the reasons why living in Providence is so expensive tax wise!
Woonsocket redevelopment spearheaded the new social flatlands and all the main street business flocked there leaving main street Woonsocket naked and void! Why? Plenty of parking for shoppers in the new social flatlands which is another problem affecting the main streets. Woonsocket is struggling to get tenant back on main street. Nobody walks anymore; most people want to park their car at the front door.
Main street business need people, shoppers, restaurants, parking, transportation infrastructure (RIPTA?), arts, entertainment venues and a safe environment to survive.
RI had a good thing going with the commercial historic tax credit which became a model to the rest of the states until Governor and General Assembly pulled the plug. For every $1 in tax credit $5 of in RI state economic activity was generated in the form of taxes, sales, wages, putting buildings back on tax rolls, creating low cost to luxury housing and small business spaces which was revitalizing the cities and towns.
Why are there so many shopping malls near the RI boarders in MA and CT? Because those states know if a carrot is dangled in front of RI RI will jump for it in sales purchases and taxes. If you compare the prices most are lower in CT and MA because cost of doing business is lower in rents, insurance, healthcare, utilities and wages.
Posted by: Ken at December 7, 2009 6:35 PMWhat we should be talking about is NO sales tax and no income tax accompanied by a total remake of government so we don't need to tax sales and income and so we don't have to raise property taxes to make up the difference.
We have a spending problem. Tax schemes won't solve it. Only deep, deep spending cuts will foster a climate in which taxes can be competitive.
Posted by: George at December 7, 2009 7:07 PM"We have a spending problem. Tax schemes won't solve it."
Exactly.
Posted by: Monique at December 7, 2009 11:14 PMGeorge,
An in-law of mine through marriage retired and moved to NH from MA. He can’t believe the taxes he has to pay!
Everyone keeps talking about how low NH taxes are however NH was ranked 4th in the nation per capita 2007 by The Tax Foundation for state and local property tax collections.
My relative can’t believe NH has an income tax on dividends and interest income and his property taxes are higher than what he was paying in MA because it depends on what city and town you live in let alone the addition of the school taxes, fire taxes, meal tax, communications tax and gross receipts tax.
Government has to find some way to pay for the services it provides to the general public. Government gives in one hand and takes with the other. The grass might not be really all that green on the other side of the fence but 2 things are for certain; taxes and death.
It took me close to 10 years to pick my retirement place depending on my individual family financial situation.
RI needs to address its tax problems and what it should be addressing is balancing its tax structure. It depends too heavily on property taxes and gambling. RI needs to put a lid on the General Fund and start more restricted receipts accounts. The General Fund is too much of an open cookie jar!
One of the reasons I left RI was because I could cut my in-state tax payments more than 50% by moving out of RI. State of RI and cities and towns provides about 99% no incentive for the retired to stay living in RI.
Each any every one of you still living in RI will grow old and maybe retire letting RI continue to stick it to you in taxes.
Posted by: Ken at December 8, 2009 12:55 AMKen wrote:
"One of the reasons I left RI was because I could cut my in-state tax payments more than 50% by moving out of RI."
Similarly, I just did the calculations on my personal situation. If I were to simply move to Seekonk or Swansea, I would save about $5,000 a year in taxes. Income taxes, property taxes, gas taxes, sales taxes. It all adds up. Anyone here in RI who would refuse an annual $5,000 handout? And the standard of living is exactly the same.
Posted by: Patrick at December 8, 2009 7:32 AMPatrick,
If you or anyone wants to get a sense and across the board look at taxes in the states as they apply to your current or future retirement income a great web site to look at is the following site:
Retirement Living Information Center:
http://www.retirementliving.com/
Be careful calculating the differences because individual circumstances are not taken into account only broad comparisons.
I moved from RI to HI. HI (10.6%) is ranked one of the top 10 highest locals by the referenced Tax Foundation verses RI at (10.2%) in paying income to state and local taxes.
However based on my individual family financial retirement income situation, living in Honolulu, HI a recognized international city and vacation destination is far better and cheaper than living in RI even though HI is ranked at a higher percentage than RI and Honolulu is a high cost living city behind Manhattan, NY and San Francisco.
My retirement income is totally exempt from State of HI state income tax (I only pay RI state income tax on that portion of retirement income coming from RI), plus my Social Security is exempted or not taxed in HI as RI taxes all Social Security income, there is no car, boat or motorcycle property tax in HI, my current total property tax is only $175.00 verses $2,700.00 for the same property value I had owned in Woonsocket, RI a year based on HI senior exemptions and discounts, there is no school; educational or fire tax, I have no New England winter heating bills to contend with (all though there is free snow plowing on the HI mountains tops), in HI lotteries and gambling is not allowed, yes every transaction except prescription drugs has a 4% excise tax (sales) on it but offsetting the 4% tax is give backs, healthcare insurance and regular insurance is lower in HI than RI, educational evening school courses are free, all beaches and beach parking are free with free restrooms, showers plus trash pickup and camping in city parks with permit is free (state parks $5) besides a nationally recognized public transit system that runs 24/7 all the islands ($2.25 one-way or senior pass $30 a year except on 1 island where it is free), parents must pay for individual child public school bussing if applicable ($0.75 one-way), local banks provide gasoline discounts up to 10%/gal to banking customers, free band concerts, ballet, symphonies and stage shows daily, free city sponsored movies on the beach, free weekly fireworks, and too many parades and block parties to attend over the course of the year all free; most all restaurants and business offer senior discounts (starting age 50 plus) up to 50% off besides the average year-round daily sunny temperature of 78 degrees eliminating two seasons of purchasing clothing (fall and winter). Yes it takes 5 hrs by jet to get to CA or 30 min max to get to another HI island but that’s a small price paid for living in paradise besides there are flight discounts offered and all telephone calls to the lower 48 mainland states are free; unlimited by local land-line telephone service.
HI is the 47th largest state by land mass but has 1 state government (Republican/Democrat balanced), 4 local counties seats with 4 mayors; 4 city councils and 1 school district with 1 school superintendent covering the whole state over 120 islands plus flying to another island for the weekend is like going to another state killing any island fever that might arise. The 4 major islands are ¾ land mass of RI to over 3 time larger the land mass of RI.
So when you start comparing, look at your financial status, present and future taxes, life style, sports and entertainment needs, educational need, business networking, cost of living, free amenities offered between locations and if you’re new location will be included as an international town or city location as it brings extra perks.
Most of all visit and spend vacations in your proposed retirement location. Meet and make friends with the locals that live there so you will have a better understanding of the taxes and environment.
What state you decide to live in, work in or move to is your own personal and/or family preference based on your needs, wants and quality of life.
By the way, living in Hawaii all your family members and friends want to visit you so make sure you have an extra bedroom!
Posted by: Ken at December 9, 2009 12:02 AM