Saturday, April 05, 2008

Returning today to the ProJo's op-ep page, Justin makes the case that economic flight is one of the most dire problems facing Rhode Island, and that a fix is needed, pronto.

First, the problem:

• Almost 30,000 fewer Rhode Islanders lived in households earning over three times the poverty level (around $60,000 for a family of four) in 2006 than 2005 (U.S. Census American Community Survey).

• Over that same period, married-with-children households earning more than $100,000 or more a year decreased by 1,033.

• According to tax returns filed in 2005 and 2006 (based on income from 2004 and 2005), Rhode Island lost, on a net basis, 8,296 taxpayers, with an aggregate adjusted gross income totaling $485 million, over those two years (IRS Migration Data). ...

If the trends portrayed in the latest available data have continued, Rhode Island has been losing around 1 percent of its tax-paying population every year since 2004, and those who’ve fled have taken a quarter billion dollars of income with them annually. Stopping this flight must become state and local governments’ Number 1 objective.

One simple solution is to make Rhode Island a more attractive place to live by decreasing the cost of living here (i.e., lowering taxes) and increasing the incentive for businesses to open up shop. Therefore, seeking to drain more tax revenue from commerce and layering taxes on corporations, both of which are “on the table” at the General Assembly, borders on dementia.

A clear consequence of lowering taxes, at least near-term, is that revenue will slip even further below spending. Compensating by taxing the rich more would simply tip the capsizing boat the other way. In 2003, the $75,000-$200,000 and $200,000-plus categories each paid around 35 percent of the total income-tax liability for the state. As the former’s percentage has dropped, the latter’s has increased to over 40 percent. As reluctant as we all may be to take taxpayer-funded services and other public-sector benefits away from those who’ve come to rely on them, our budget must be balanced entirely from the spending column.