Rhode Islanders for Tax Equity release a powerful new video today that explains why un-flattening the income tax code and increasing the rate that the richest residents pay would help to solve many of the issues that are currently plaguing the state.
The group, made up of many unions and economic activist groups from around the state, is pushing for passage of the Cimini-Mill bill which would increase income taxes for those who make more than $250,000 a year.
You’ll notice the video says the tax rate was lowered in 2006. And if you’re a regular reader of RI Future, you’ll remember that House speaker Gordon Fox told me recently he wouldn’t consider this bill this session because it is the first year that the new tax rate was in place. In actuality, the tax rate has been getting flatter since 2007 and this is the first year it is completely flat at the top.
Here’s a chart showing unemployment going up as the top tax rate goes down:
RITE has an interesting slogan on its website: “Rebuild RI the RITE Way.” Not too far off from the Projo’s new series of the state of the state’s economy, “Reinvent RI.” Interestingly, both efforts are designed to help Rhode Island get out of the economic mess it is in.
George Nee, president of the AFLO-CIO and a member of the group, added in a press release that such a move would be a boon for Rhode Island’s struggling economy:
“Only the top 2% of income earners in Rhode Island will be affected by this bill. Our hope is that the other 98% will benefit through this increased revenue, which could be used to lower property taxes, help small business owners create jobs, stop college tuition increases, restore funding to programs for the neediest Rhode Islanders, and fix our roads and bridges. This is a bottom up campaign. We are hoping this video helps educate and motivate lower and middle-income Rhode Islanders and helps create a groundswell of support for this bill.”
We can’t afford the government we have so how would raising taxes on the ‘2 percent’ fix that and do all that George Nee says it will do. How does Massachusetts do it? I am not opposed to paying more for good government but that’s the rub. We aren’t getting our money’s worth. While you claim the tax rates have been flattening out, it is not a true flat tax when too many people are exempt.
If we want to understand what progressive taxation is all about all we have to do is start looking at the old tax tables of the New Deal. I have started that where I blog with these two posts.
http://www.angrybearblog.com/2011/09/define-rich-part-iii-what-tax-tables-of.html
This one looks at 1936: http://www.angrybearblog.com/2012/03/defining-rich-vi-1936-tax-tables.html
I also recall the argument for lowering our top rate was that it would bring more “rich” people into the state. I have not seen any numbers on that account. Pretty poor economic plan to rely on attracting rich people. Then again, this is the state that thought it could build an economy on health care in the late 80’s.
The states overall problem is not one it can solve on its own. This is a national policy problem and with states like Wis., OH, Ind, FL and the rest of the south we have a long road ahead of us.
Rhode Island’s compounding structural problems aren’t going to be solved by higher taxes on anybody. It’s not a revenue problem, it’s a spending problem, and it’s only going to get worse without real spending reforms.
The police and fire pensions that were handed out at 5-6% annual compounding COLA like hotcakes in the 1990’s are going to soar exponentially to over $1 million/year by the time those retirees are in their 90’s. We’re talking about hundreds and hundreds of people who retired at an average age of 47. There is no possible way the state can support those kinds of costs no matter how “progressive” its income tax policies. The self-interested unions are just trying to buy precious time with these bills to get theirs and get out before the whole system comes crashing down. They can do math – they know it can’t continue.
The union contracts need to be broken. Not because “the rich” won’t pay their fair share, but because the terms cannot mathematically be sustained into the future and the General Assembly cannot legislate away reality. The law has avenues to make this transformation happen, even when the 100-200k pension retirees refuse to negotiate – it’s called Chapter 9 bankruptcy, and it will be performed in Federal court, out of the hands of those who created and perpetuate this mess.
Rhode Island will learn to live within its means, and it will not be easy medicine for the patient to swallow.