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Wed, 19 Sep 2007
Can't get a break, even when they give them.
[Appeared in the RIMG papers last week.]
A few weeks ago I met a guy, a Republican who shall remain nameless here, out of kindness, since he's not a public figure yet. He's thinking of running for the state senate next year, and in conversation, he told me that part of the reason he's running is that Rhode Island raised taxes more this past spring than any other state. This is, of course, ridiculous, the kind of non-fact that deserves to be laughed out of the room whenever it comes up.
You've got to pity some of our leading state policy makers: Bill Murphy, the Speaker of the House, Steven Costantino, Chair of the House Finance Committee, and Gordon Fox, House Majority Leader. With the Governor's happy cooperation, they have engineered several years of tax breaks for the wealthiest citizens of our state. Putting aside their partisan differences, together they have brought our state, along with its cities and towns and school districts, to the brink of bankruptcy by easing the heavy burden on the richest of the rich. And yet, try as hard as they have, out comes a report from the National Conference of State Legislatures that says that Rhode Island raised its taxes more than any other state in 2007. Some people just can't catch a break.
The NCSL report ("State Budget and Tax Actions 2007", available at www.ncsl.org for members only and on mine for anyone who wants it) is quite clear: Rhode Island is the only state that raised taxes by more than 5% (page 9). What a scandal.
Well maybe it would be a scandal if it had really happened. Some years ago the state established a hospital licensing fee. For reasons that remain unclear, the original legislation back in the 1990's made the fee expire in a year. But the very next year, the budget writers felt that balancing the budget required that money, so the Assembly tucked it into the budget bill and passed it again the next year. Then they did it again the same way the next year, and the next and the next. So this is a tax that's been in place for a dozen years or so, even though it has been passed each year as a one-year extension. The fee raises a fair amount of money; the total expected this year is around $78 million, between 2% and 3% of the taxes the state collects, depending on how you count.
When the NCSL researchers were compiling their report, they saw that the tax was passed this spring, and so they counted it as a tax increase. What's really funny is that the Assembly actually *cut* this tax slightly, lowering the rate from 3.56% of patient revenues to 3.48%. (This brings their revenue forecasts into some question, but that's a story for a different week.) So that's how we wound up on the top of the list of tax-raising states this year: by mistake.
In defense of the NCSL report, it does point out that there were plenty of hidden tax increases in this year's state budget. Just about every fee the state demands was increased, from tuitions at the state colleges to car registration fees to license fees for building contractors. In total, the fees collected by all the different state agencies went up by a quarter to over $70 million. It's silly to claim this isn't a tax increase, and it's to the NCSL's credit that they refused to fall for that ruse.
But being right on this count doesn't excuse them from being so wrong on the other. The fact remains that sloppy work by NCSL researchers mistakenly transformed a minor tax cut into a massive increase in an authoritative-sounding report. And this is what will happen with that mistake. People who think that any government is too much government will take this non-fact created by the NCSL researchers, and shout about it, everywhere. You'll hear it in letters to the editor, in speeches by candidates for office, on talk radio shows, in clever asides in newspaper articles and in conversations with your friends. It will become part of the accepted wisdom, the stuff that "everyone knows." And the constant repetition will make it nearly impossible for legislators to do the right thing by our cities and towns next year, and so your property taxes will go up again, your school services will be cut again, your roads will remain unfixed.
So this is what you need to do: whenever you hear a politician or friend use this statistic, you need to laugh and ask if they've always been this gullible. Remember, it doesn't matter whether you support the hospital licensing tax or not. We're talking about correcting matters of fact, not opinions about taxes. The only way our state is ever going to have a rational discussion about any kind of policy is if the misconceptions are thrown out the door, so be ruthless. And laugh loud.
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