November 29, 2005

Rhode Island's Retrograde Fiscal Culture

Carroll Andrew Morse

Rhode Island has a $60,000,000 budget shortfall. And the news gets worse. Rhode Islands revenues have gone bust at a time when tax revenues in most other states are booming. According to a recent USA Today article

Soaring state tax collections have created momentum for tax cuts in 2006, when most governors and legislators will face voters.

State and local revenue rose 7.2% in the first nine months of this year, the biggest jump since 1990, according to the U.S. Bureau of Economic Analysis.

The problem is not that conditions in Southern New England are somehow different from conditions in the rest of the country. The Boston Globe reports that Massachusetts is ahead in its revenue collection for the current fiscal year
Because of the improved economy, tax revenues from personal income taxes, corporations, and other levies are running 7.9 percent ahead of projections for the current fiscal year, putting the state $232 million ahead of what it expected to have by the end of October.
(Most of the Globe story is about how Massachusetts is, in fact, very much like Rhode Island; with revenues running ahead, the Democratic controlled state legislature is preparing to spend! spend! spend!)

The State Comptroller of Connecticut projects that Connecticut will also end the year with a significant surplus

State Comptroller Nancy Wyman today projected the state will end the 2006 fiscal year with a $135.4 million budget surplus.

The estimated surplus has risen by about $106 million in the last month, mainly due to strong collection of income taxes related to taxpayers' investments in financial markets.

The fact that our neighbors doing well shows that the Rhode Island budget shortfall is not a problem created by implacable macroeconomic forces spiraling out of control; economic conditions in Rhode Island are similar to economic conditions in Massachusetts and Connecticut.

Rhode Island's problems are rooted in poor fiscal management and irrational spending policies. They cannot be be solved by giving even more money to the government that created this mess in the first place.

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This is really amazing. How can CT. and Mass. being doing so much better than us? Both states also have very high state and local taxes. Are we really spending more on social services, etc. than CT. and Mass.?

Posted by: citizenjane at November 29, 2005 4:27 PM

Per capita, yes. We pay more and we get less. Part of it is economy of scale, but most of it is that our leaders don't seem to get the correlation between tax levels and people's desire to live here. Our overall taxation levels are higher than our neighbors, too.

It's not that MA and CT are "good" -- in fact they are fairly bad -- it's that we are relatively worse. When Rhode Islanders consider "Taxachusetts" to be a tax haven, we're all in deep trouble.

Posted by: Will at November 30, 2005 1:22 AM