March 23, 2011

Thinning the Fuel Won't Create Efficiency

Justin Katz

My Patch column, this week, defines the target population of Rhode Island's recent and proposed tax changes and offers a brief economics lesson to suggest that the apparent strategy is perhaps not the best:

The consequence, overall, is that Rhode Islanders who've invested in property have seen local taxes climb inexorably. Last year, the real cost of those investments increased courtesy of the income tax change. Meanwhile, the tax bite resulting from their efforts to improve their financial positions broadened, and now they'll be rewarded for modest spending habits with a new sales tax targeting essentials. The harm is exacerbated if they've had the audacity to reproduce, thus creating larger families requiring more of life's basics.

In short, with Rhode Island's economic recovery barely detectable, and scarcely felt, the state is turning the screws on home-buying parents who are striving to build their futures. The tendency may satisfy special interests, by protecting government handouts and special deals, and it may comfort politicians, inasmuch as busy families are less able to be politically active, but it is economic suicide.

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"Maybe it was the comment that a socially liberal young professional with economically conservative tendencies left on that pushed me over the edge: "Yes, the end result [of Governor Chafee's proposed sales tax increase] will be $165 per-capita, per year," he wrote. "Still a drop in the bucket.""

As Justin goes on to point out in his column, it's exactly that sort of "drop in the bucket" incrementalism that has gotten this state the 5th highest state and local tax burden. Rhode Island politicians proposing yet another tax hike - here, I am specifically thinking of the Chafee admin and their Economic Death and Destruction II - are careful never to look back at what happened to tax rates prior to their regrettable but really quite reasonable tax proposal.

Posted by: Monique at March 23, 2011 7:48 AM

Per-capita? Has anyone calculated it per taxpayer?

Posted by: Max Diesel at March 23, 2011 11:37 AM

Great point, Max.

Posted by: Monique at March 23, 2011 12:21 PM
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