There’s something to be said about growing the economy through support for its locally-owned and operated small businesses. This may come as a major surprise to many faithful RI Future readers, but there’s one component of the Governor’s budget that I can support: the Small Business Jobs Growth Tax Credit.  There are some changes I would make to the program, and I think there are different strategies that would work better at growing the state's economy, but the proposal is smart.  It encourages the hiring and sustained employment of unemployed workers who have needed to rely on state assistance.

Businesses with at least 5 employees, but with no more than 100, working in the state can receive a tax credit of $2,000 for hiring qualified employees.  A qualified employee is one that is a Rhode Island resident that had collected state welfare benefits or graduated from college or technical school within 24 months of being hired.

The new employee must work at least 30 hours a week, must receive at least 250% of the state’s minimum wage (at least $18.50 per hour), must work for at least 18 consecutive months, must be eligible for health benefits provided by the employer, and the employer must have a greater number of employees.

Ironically, if all the other tax credit and corporate subsidy programs were modeled using principles that ensured high quality and decent wage jobs, then the state wouldn’t be in the predicament it currently is in (or at least the problems wouldn’t be as severe).  The state seems intent on doling out huge sums of money to large corporations without any accountability.  At least this proposal makes an effort at targeting subsidies to benefit Rhode Islanders who are likely to expand the state's economy.  For that reason I could get on board with the Governor's proposal.

Unfortunately, when you do the math, these jobs could work out to pay only $28,860 a year, placing the "qualified employees" in the bottom third of income earners.  Additionally, as with any other tax credit program, one must keep in mind that these credits will likely subsidize employment that may have happened anyway.

Despite these challenges, and with the full understanding that there are other ways to encourage employment (specifically workforce development strategies), I don’t necessarily disagree with this plan.  Putting people back to work quickly and subsidizing that employment through a $10 million state program is more than reasonable in an economy with almost 13% unemployment.