November 19, 2010

Another Phrase for "Taxpayer Subsidized"

Justin Katz

This group of industries seems a bit too narrow to count as a "knowledge economy" or to stand as comprehensive representatives of the value of intellectual capital. Indeed, another quality that they share would be a much better descriptor:

The knowledge economy refers to the health-care, life-sciences, research and green-technology sectors and to the idea that work, jobs and wealth are created with innovative brain power.

Especially with healthcare and "green" technology, the application of knowledge isn't much more relevant than it is in just about any industry, but what all of these sectors have in common is that they're taxpayer subsidized. Note the examples:

In 2009, Lifespan Hospitals successfully sought $49.2 million in competitive grants from the National Institutes of Health, he said. Brown University pulled in $180 million in research grants for the 2009-2010 school year, a 37-percent increase over the previous year, Hatfield said. And the University of Rhode Island got $105 million in grants, 60 percent more than three years earlier ...

Grants, if not given directly by government departments, are typically provided by tax-exempt entities, and in the cited cases, they're going to tax exempt entities. The picture accompanying the story features Providence Mayor-elect Angel Tavares, General Treasurer-elect Gina Raimondo, and state Sen Joshua Miller (D, Cranston); one wonders whether and why they're supportive of a strategy of relying on organizations that don't pay taxes to grow the state's economy.

Fortuitously, Jim Hummel's latest report expands on the broadly recognized fact that almost 40% of Providence property is currently owned by tax-exempt groups by catching retail enterprises that serve the knowledge economy as selected partners failing to charge sales tax. The immediate controversy is that the stores (including a Starbucks) are supposed to tax non-students, but even were they complying with that rule, exempting sales taxes for certain private businesses can only harm others that seek to capitalize on "knowledge economy" participants like students.

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.

"The knowledge economy refers to the health-care, life-sciences, research and green-technology sectors..."

I saw that too and thought it was a bad definition (most would agree that IT and digital media professions are part of the knowledge economny).

"Especially with healthcare and 'green' technology, the application of knowledge isn't much more relevant than it is in just about any industry..."

There you're flat wrong. IT is a huge component of healthcare and healthcare IT is especially releveant in discussions of the new economy.

Posted by: Russ at November 19, 2010 8:52 AM

For example, Knowledge District posterchild, Nabsys.

Posted by: Russ at November 19, 2010 8:57 AM

While I don't think it's right or fair to tax colleges, hospitals, and churches, I do think that if any of those institutions have properties or square footage dedicated to commercial purposes, that property should be taxed as-such.

Also, Providence taxpayers pay upwards of $30/$1000 in property tax because they host so many schools, hospitals, elderly homes, churches, and other non-profit institutions. I can't imagine what the rest of the state would look like if it wasn't for the economic engine of Providence, and there has to be a way to provide some relief for the city. We need a 'funding formula' that respects that Providence taxpayers are taking the hit for the team.

And I'm not even a Providence resident.

Posted by: mangeek at November 19, 2010 10:30 AM


In Hawaii every property owner pays county property tax including nonprofits, private schools, colleges, university, churches, hospitals etc.

The only difference is the exemption status that is applied and the fact that rest of real property owners must rely on homestead and senior age exemptions to lower real property tax.

In my individual case my homestead and senior age exemptions have lowered my real property tax below the Honolulu County minimum tax so I must pay the set minimum tax for my county on my gated condominium property.

The four Hawaiian County City Councils with the mayors set minimum county tax where if the exemption status and tax rate lower your real property tax below the minimum level you must pay the minimum set property tax for the county.

Minimum property tax is Honolulu County=$300, Maui County=$150, Big Island of Hawaii County=$100 and Kauai County=$25.

Nonprofits, private schools, colleges, university, churches, hospitals and listed historic properties are required to pay the set minimum county real property tax which they reside in.

State of Rhode Island cities and towns could set minimum real property tax limits like Hawaii has done.

The Tax Foundation has called Hawaii’s general excise tax (sales tax) one of the simplest to administer and lowest the nation with the highest per capita income in the nation. What the Tax Foundation did not take into account is that Hawaii is a luxury vacation destination that averages 120,000 tourists per day spending money and paying the general excise tax. Tourist spending only (sales tax income) for 2010 is on track to reach $11.47 billion by December a 14.8% increase over year 2009.

State of Hawaii exempts only prescription drugs from the excise tax and all other transactions for-profits and nonprofits goods and services are taxed. General excise tax is 4% except on Island of Oahu and Honolulu County where a ½% surcharge was add to pay for $5.8 billion high-speed light rail transit system.

What was the strategy behind State of Hawaii’s thinking when they set the up the general excise tax? As indicated by the division of taxation Q/A page the state did not want to show preferential treatment to any business, organization or service.

Now you might indicate being taxed 4 or 4.5 cents on the dollar for groceries, baby formula, OTC aspirin and clothing is out of line but you don’t even notice it after a while and if I purchase $20,000 a year of taxable items at Rhode Island’s 7% rate it equals $1,400 in taxes compared to Honolulu Hawaii’s 4.5% rate equaling $900. On big ticket items am I going to do internet shopping to save 4 to 4.5 cents on the dollar not if I have to pay $100 in shipping charges.

It all balances out as everyone in Hawaii for-profit and nonprofit are paying taxes to support the government services received and the Hawaii constitution requires a balanced fiscal budget for two years and if there are excess funds at end of fiscal two years those funds must be returned to the taxpayers. I’ve already received one rebate check.

Rhode Island taxation system state, city and towns are a patchwork quilt of laws and exemptions to benefit special interests. Rhode Island as a whole needs to revisit the way it is taxing across the board and bring some continuity to the taxes and tax system. Have you ever gone down the list of what is taxed and what is exempted in Rhode Island? The amount of paperwork and administration is enormous!

Posted by: Ken at November 19, 2010 6:40 PM
Post a comment

Remember personal info?

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