Complain all you want about Rhode Island’s comparatively high corporate tax rate – at 9 percent we are one percentage point higher than Massachusetts and two higher than Connecticut – but our state tax code also has some built-in benefits for businesses that actually create jobs.
Alexion Pharmaceuticals, which now employs almost 200 people in Smithfield making a medication that treats a rare blood disease, hopes to take advantage of this tax incentive. Tonight, the Connecticut-based company will ask the EDC to lower its RI tax rate from 9 percent to 6.75. The request comes under the Jobs Development Act, a 1994 law that lowers a businesses corporate tax rate when it creates new jobs. Alexion created at least 10 new jobs a year between 2007 and 2009, the company says.
Alexion, which has invested about $200 million in the Smithfield manufacturing plant since 2006, reports no profits in Rhode Island during that time period, says a story in the ProJo. But business beat writer Kate Bramson reports that the tax break could be a boon in future years too, so long as Alexion retains at least 92 local emplolyees.
I’m not sure if the request implies that Alexion intends to move a portion of its hefty profits from Connecticut (where it presumably pays a 7 percent rate) to Rhode Island – where, with EDC’s blessing tonight, it could pay a quarter of a percentage point less (it could also mean the business is for sale).
I’m wondering if the EDC board could make showing local profits a contingency of its approval? According to EDC’s website, the Jobs Development Act “benefit is subject to a finding of revenue neutrality and vote of the RIEDC Board.”
In total, the Jobs Development Act, passed in 1994, costs the state $16,394,619 in tax dollars last fiscal year – that’s almost half of the $34 million the state gave away in total tax credits, according to a report from the Division of Taxation. CVS alone saved $15,446,563 because of the law. Electric Boat is the second biggest beneficiary, saving $602,160. Citizens Bank saved $120,402; AAA saved about $110,000; United Natural Foods saved $108,979; and Connecticut-based RITE Solutions saved $8,403.