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Sun, 06 Apr 2008
Handy/Moura hearing: special tax breaks and the general good
Last week, there was a State House hearing about the "Economic Growth and Fairness Act," a complex tax reform bill sponsored by Representative Art Handy (D-Cranston) and Senator Paul Moura (D-East Providence). (First, the full disclosure: I did research to support this bill, and testified for it. I've never claimed to be an objective journalist, only an honest one.)
Before the hearing, there was a rally in the rotunda protesting cuts to Head Start, the early-childhood education program. "Great," you say, "yet another interest group, trying to protect its special program that's costing us money." I watched the rally, then went downstairs to the hearing.
And do you know what I saw there? Lots of other interest groups trying to protect their special programs, mostly tax breaks. The difference? These people were wearing nice suits. (So was I. As I said: full disclosure.)
Now this is a little unkind, and perhaps a little easy. The business owners and managers who crowded the hearing play an important part in our state's economy. What they say is important, and what they do is even more important. But it's not always obvious how far they are from other people looking for assistance.
Despite the heated rhetoric, the Handy/Moura bill is really just an attempt to undo much of the last 15 years of poor tax policy in the state. The idea is to provide property tax relief for people who've seen their local taxes rise (15%, capped at $600, available to renters, too) and to restore the income tax to the level of 1996, a bargain that would save money for about 90% of the state's taxpayers. The act also takes on a whole slew of tax preferences that have crept into the code over the years. (Did you know that horse food is exempt from sales tax? Do you wonder why?) It also attempts to broaden the sales tax to services, in the hope that the rate can be lowered from 7% to 5.5%. It is an ambitious bill, but calling it radical is only for people who think Hillary Clinton is a dangerous subversive.
The hearing room was jammed. It seemed as if the entire membership of the Chamber of Commerce turned out. Banks were there to talk about special tax preferences for banks, biotechnology companies were there to support tax preferences for biotechnology companies and rich manufacturers were there to support tax breaks for rich people. They all had something to say about how their favorite tax break was crucial to the state's economy.
Were any of them there to talk about the economic value of good schools, clean water and safe bridges? Not so much. Ed Cooney, the Chairman of the Greater Providence Chamber of Commerce and an executive at Nortek, didn't so much as mention the fact that he's also the president of the North Kingstown Town Council. North Kingstown's schools are taking a $3 million cut to a $60 million budget this year, but he didn't speak a word about how state aid to his town's schools, after adjusting for inflation, is down 10% under this Governor.
So what about those tax breaks? There are lots, but look at one of them. Rep. Steve Costantino (D-Providence), the Finance Committee chair, complained that the bill would cut the biotechnology tax credit. "But," he said, "we targeted this one carefully." And he's right: the bill provides an investment tax credit for biotechnology companies, and it is careful to define the jobs at the company receiving the credit as full-time and decent-pay. How much does this cost us? Well, the Tax Division has no idea. Just guessing from the size of the companies involved, it's probably in the several hundreds of thousands of dollars, though probably not in the millions. Do we get jobs out of it? Probably. But we have to ask ourselves: is the best way to grow a biotech industry in Rhode Island to subsidize biotech companies? How many should we subsidize? For how long?
If it takes a subsidy to keep a company in our state, isn't that a sign that we're doing something else wrong? What does that say about our quality of life or the quality of the employees they're able to find here? And if the price of that tribute we pay is an inability to address those quality issues -- not to mention the screaming social problems that surround us -- then what have we gained?
Personally speaking, I want to see my children educated well, I don't know how I'm going to pay their college tuitions, I wish there were a solution to the health insurance costs that are eating my business alive, and I don't want to die some day when I-95 collapses while I'm driving through Pawtucket. All of these are serious issues and our government is currently addressing none of them, largely because the Governor and his allies in the Chamber have cowed legislators into thinking that all they can do is manage the decline.
So I say Hurray for Art Handy and Hurray for Paul Moura and Hurray for any other legislator who recognizes that we didn't elect them to manage our government into irrelevance. (And another Hurray for anyone who writes them in support.) I want a government that pays its bills and one that can address the problems I face. A government that can't help its citizens is no bargain, regardless of cost.
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