Five Questions With: Michael DiBiase

MICHAEL DIBIASE is CEO and president of the Rhode Island Public Expenditure Council. / COURTESY NEW HARBOR GROUP

Michael DiBiase is CEO and president of the Rhode Island Public Expenditure Council. He previously served five years as the state’s director of administration. He spoke with PBN about RIPEC’s recent analysis of the state tax climate and priorities for the upcoming legislative session.

PBN: RIPEC recently wrote a policy brief analyzing the latest state tax climate rankings by the Tax Foundation, including Rhode Island’s drop from 38th to 40th. Were you surprised by that data?

DIBIASE: We were not surprised that Rhode Island’s business tax climate ranking worsened somewhat since last year. After improving from 44th in 2014 to 37th in 2019, Rhode Island has made no major recent changes – positive or negative – to its business tax policies. The drop in Rhode Island’s ranking from 38th last year to 40th this year was due to business tax improvements enacted in other similarly ranked states.

 

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PBN: What do you see as the biggest weakness in the state’s tax policy or climate for businesses?

DIBIASE: Businesses in Rhode Island face higher taxes compared to other states. Over the last several years, policymakers have focused on reducing taxes and providing subsidies for certain development projects but have not structurally addressed the heavy tax burden broadly imposed on businesses.

Rhode Island businesses pay among the highest property taxes in the country, with high commercial rates and even higher tangible personal property tax rates – resulting in a disincentive for businesses to invest in the state. Tangible taxes are particularly onerous, imposing significant tax compliance burdens on small businesses.

Rhode Island’s unemployment insurance system, which is entirely paid for by our state’s employers, is ranked second-worst in the country by the Tax Foundation, in large part because it has high rates assessed on a high wage base compared to other states.

PBN: Going into the 2022 legislative session, what are RIPEC’s top priorities for improving the state business environment?

DIBIASE: RIPEC is focused on improving the state’s property tax system, specifically through the reform or elimination of the tangible property tax. Businesses already pay a disproportionate share of property taxes. With values for residential property increasing sharply in relation to commercial property, there is a concern that this imbalance could worsen.

RIPEC will continue to oppose efforts to raise the personal income tax rate on high earners. Rhode Island’s income tax rates are already high relative to other states, and much less competitive than neighboring Massachusetts.

RIPEC also favors using federal pandemic relief funding to recapitalize the Unemployment Insurance Trust Fund and shield employers from future rate increases. Entirely paid for by employers, the UI fund was severely impacted by the government-mandated shutdowns and by unprecedented fraud.

Finally, a high-performing K-12 education system is essential to a strong workforce and business environment. Rhode Island’s K-12 system is currently in crisis, with only 1 in 5 students proficient in math and 1 in 3 students proficient in English language arts, according to the most recent statewide standardized assessments. It is imperative that school districts wisely invest hundreds of millions of dollars in federal relief funding to address learning loss caused by the pandemic and pursue reforms to improve teaching and learning.

PBN: How does the windfall of federal stimulus funds impact your priorities/policy recommendations for the upcoming session?

DIBIASE: Federal pandemic stimulus funds present a once-in-a-generation opportunity to make investments that can transform economic opportunities for Rhode Islanders. While the governor and General Assembly have appropriately allocated some of the funding to respond to immediate pandemic-related needs, RIPEC supports investing the remainder of these one-time funds in long-term, high-impact areas such as workforce development, housing and business assistance to improve Rhode Island’s economic trajectory.

RIPEC will continue to emphasize that these one-time funds should not be used to pay for recurring state expenditures that will become unaffordable once the federal funding has been exhausted.

PBN: Are there nonpolicy ways you think the state could make things easier for small businesses?

DIBIASE: The pandemic has triggered or accelerated dramatic changes in our economy, including the nature of our workforce and how goods and services are bought and sold. Small businesses, in Rhode Island and across the country, will be challenged to adapt and transform to succeed in this new environment. We need to continue to find ways to assist our businesses with the capital and technical capacity required to make these transitions.

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

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