Updated March 24 at 12:29am

RIPEC: State rankings hurt by high cost of doing business


PROVIDENCE – The high cost of doing business in Rhode Island has hurt the state in recent national rankings, according to a new report released Thursday by the Rhode Island Public Expenditure Council.

The report, “A Review of Rhode Island’s Business Climate and Cost of Doing Business Rankings,” is an updated review of the state’s business climate, including an analysis of how the cost of doing business in Rhode Island compares to neighboring states as well as the country as a whole.

The RIPEC report examined four business-climate rankings – two from research organization two by media outlets – as well as two cost-of-doing-business studies.

“Consistent with past reports, Rhode Island continues to rank in the bottom ten states in most business climate analyses, despite recent efforts to improve the state’s standing,” said RIPEC.

The organization analyzed the rankings from the Tax Foundation, the Beacon Hill Institute, Forbes and CNBC as well as a ranking the Tax Foundation and KPMG and a ranking by the Council of State Taxation and Ernst and Young.

The cost-of-doing-business category includes taxes, labor costs, utilities and real estate costs, and is weighted heavily in business-climate studies. According to RIPEC, it is an area in which Rhode Island has “the most opportunity to improve its position in the national rankings.”

The report discovered that Rhode Island’s relatively high tax burned and “complicated regulatory systems” are two of the main factors driving the state’s poor performance in the area.

“Taxes and the state’s regulatory environment are two areas in which the state has committed to making improvements, and reform efforts should continue; however, as these studies show, Rhode Island’s efforts have not been sufficient to move the state up in national rankings” John Simmons, RIPEC executive director, said in a statement.

“The state should build on the efforts of the past year and move forward in a collaborative, strategic endeavor to change this dynamic,” added Simmons.

On the 2012 CNBC “States for Doing Business” index, Rhode Island ranked 45th. The Forbes report ranked Rhode Island 41st highest nationally in terms of cost-of-doing business and the Tax Foundation’s “business-tax friendliness” index ranked the Ocean state 46th nationally. In the Tax Foudnation/KPMG study, Rhode Island’s cost-of-business ranked 44th for newly established firms and 46th for mature firms. In the COST/Ernst and Young tax competitiveness index, Rhode Island ranked 49th.

RIPEC called the Beacon Hill Institute report the state’s “one bright spot.” That report ranked Rhode Island 19th overall.

The RIPEC report suggested that in order to reinvigorate the Rhode Island’s business climate, “distinct from the piecemeal approaches of the past,” state and local leaders need to consider developing a multi-year strategic tax plan that would: lessen the overall tax burden, ensure a proper balance between state and local taxes, reduce tax inequaities among localities in the state, equitably and efficiently fund public services (particularly education) and improve Rhode Island’s competitive position.

To view the full report, visit: www.ripec.org/.


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