Unleash R.I.’s economic power <br>by unchaining state’s businesses

To the Editor:
Innumerable news pieces describe incremental efforts to put Rhode Island on a more competitive footing with our New England neighbors by simply having a balanced budget.
Unfortunately, each of the proposals will be met by the usual resistance from the associated characters. Still, with much hand wringing, some of the ideas may get implemented.
But there is an undercurrent to all of these discussions. It has been mildly encouraging to hear Gov. Donald L. Carcieri vow to stand strong on keeping taxes where they are. It also helps to hear the power brokers in the Statehouse (with far less conviction than the governor) say that there is no appetite for tax increases.
They talk of “tough decisions” and “tightening the belt.” But they also refer to “new revenue streams” and “alternative strategies.” To state the obvious, a “revenue stream” to a government is nothing more than a tax in sheep’s clothing.
There is talk of the need to invest in economic development in order to create jobs. They listen to small-business leaders about what might need to happen to strengthen the local economy. But in the end, will the legislators resort to the least “creative” means of closing a budget gap?
Imagine running a lemonade stand. You try to sell a cup of lemonade for $5 and wonder why revenue is not higher. How would you get more money in for your efforts? In Rhode Island, you would claim that there is no appetite for a price increase for several days, you would try to find lemonade mix for a few nickels cheaper, and put two ice cubes in a cup instead of three. Finally, at wit’s end, you raise the cost to $6 per cup. And then you wonder why sales do not go up.
The fiscal health of Rhode Island can only be established – as opposed to restored; after all, when was the last time the state was healthy? – by adding new, productive jobs. And there is a simple means of adding new jobs.
More than 100 small-business owners sat in the Rhode Island Economic Summit recently, many of them strong despite having hooks surgically installed by the Statehouse tax doctors, who have been so successful at their work that Rhode Island’s business-tax climate is the worst in the country.
And yet, it would not take much to improve the situation. Corporate income-tax receipts were less than $160 million of the $7 billion budget in 2007. Leave those dollars in the businesses by eliminating the tax and guess what happens?
According to a Congressional Budget Office study, 74 percent will go directly to employees of those corporations and will be treated as income, thus generating tax receipts.
Of the remaining portion, some will be distributed to owners as income (more tax receipts), and some will be reinvested in the business, creating jobs that will … drum roll please … generate new tax receipts.
Finally, Rhode Island would be a haven to start or expand business, creating more new jobs.
Until then, however, every business that looks to New England will simply pass over our state. Every company that starts up in eastern Massachusetts or Connecticut is a lost opportunity for Rhode Island. Until that reality is recognized, we will continue to see our fiscal health deteriorate as new opportunities are missed.
It is time for Rhode Island voters to start thinking this way. Of course, reducing taxes on existing and potential producers does not reconcile with the ideology of the dominant political incumbency that has run the state for generations. But that is a different discussion … sort of. •