To Henry Shelton’s way of thinking it makes far better sense to lower taxes for the working poor, than it does to support a proposal that proponents suggest would create job opportunities for them. He’s asking the state legislature to approve a “refundable earned income tax credit” that would cost about $16 million, while opposing any adjustment to the capital gains tax, a proposal he calls “unconscionable.”
Shelton, who runs the George A. Wiley Center in Pawtucket and has been a longtime advocate for the poor and disadvantaged in Rhode Island, suggests there’s no evidence to support claims that eliminating the capital gains tax will help create jobs.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
To support his proposed tax credit, Shelton says the poor in Rhode Island, on a percentage basis, pay more in taxes than the wealthy. He says those in the lowest 20 percent of income pay 14 percent of their family income on all state and local taxes, while those in the top 20 percent pay only about 10.5 percent.
It’s not so clear cut. Figures tell a number of stories, and further on in the RIPEC study, it suggests that Rhode Islanders generally pay less in personal income tax than similarly situated households in other states do. The top 1 percent of Rhode Island wage earners, however, pay more in personal income tax than all but five states, more than neighboring Connecticut and Massachusetts, and 11.6 percent above the national average.
We’re not opposed to helping the working poor. In fact we see considerable merit in their arguments, but we take umbrage at what amounts to an emotional response to tax concessions for the top wage earners. Shelton and others contend there’s no evidence that reducing taxes in general or specifically on capital gains for the wealthiest Rhode Islanders would result in additional jobs. Proponents argue that the tax and capital gains concessions would create jobs and make Rhode Island a more competitive state.
The fact is we are not competitive. It is generally acknowledged that taxes for businesses and for top income earners in Rhode Island are above those of our neighbors and above much of the nation. The problem is we can’t measure very accurately the number of companies that look at that situation and summarily dismiss Rhode Island as a potential location for a division or for their company headquarters.
One corroborative piece of evidence may be the consistent surveys that suggest Rhode Island remains among the worst states for entrepreneurial activity. It’s not that we lack people with good ideas, it’s that we lack an environment in which to nurture those ideas. By addressing the capital gains tax, we will be at least addressing one of those areas that might help give us a competitive edge.
