Contributors
Ed Cooney and Laurie White: Stop R.I.’s economic death spiral
01:00 AM EDT on Wednesday, March 19, 2008

EVERYWHERE you go these days — the grocery store, the elevator, the doctor’s waiting room — people are talking about the economy, and giving voice to a deep unease. Everyone wonders, What will happen to our jobs? Where will help come from? How can we make our economy grow? The debate is pitched and emotional, and the temptation to go look for quick fixes is great. Business and government face an enormous responsi-bility to promote policies that will steer Rhode Island safely through these difficult times. And these are difficult times.
The Chamber and Sovereign Bank recently released our state’s 2008 Economic Outlook report. When consumers were asked to rank the top strengths of Rhode Island, they put employment opportunities — jobs — last! And when companies were asked to name the top challenges of doing business in Rhode Island, 79 percent ranked taxes as their number one concern. Clearly, job insecurity, small-business survival and the poor tax climate are tightly linked.
By any measure, Rhode Island’s tax burden does not stack up well. We consistently rank at, or near, the very bottom. Consider the following:
• The Tax Foundation’s 2007 State Business Tax Climate Index: Rhode Island ranked dead last: 50 out of 50 states.
• Small Business Survival Index: Rhode Island ranked 48 out of 50.
• CNBC’s Top States in America for Business: Rhode Island ranked 48 out of 50.
Couple these worrisome indicators with that we are losing population at all ends of the spectrum and you have a bubbling cauldron of trouble.
But we can turn these rankings around if we stay the course. Two years ago, Rhode Island achieved a tremendous pro-jobs success when the General Assembly — championed by House Speaker Murphy and House Finance Committee Chairman Steven Costantino — enacted a tax-reform package that included the “optional flat tax.” It was a bipartisan effort involving many principled leaders. The bill was signed by Governor Carcieri in July 2006, setting the clock for the gradual six-year phase-down.
Our state was hailed nationally for this visionary piece of pro-growth legislation. Widely read business publications, such as The Wall Street Journal and Forbes, trumpeted the move, making it plain that a competitive tax climate is critical to job creation, charitable giving, “people and talent” retention and overall economic development.
Good ideas spread fast. South Carolina Gov. Mark Sanford is championing the flat tax, bluntly asserting that tax rates “matter in terms of bringing jobs and investment to our state.” And that’s from a governor whose state is bustling.
In his Feb. 27 column (“Inviting graft, corporate welfare”), lobbyist Giovanni D. Cicione unfairly criticized the General Assembly and Mr. Costantino, in particular, for enacting targeted industry incentives supported by business in recent years. He argued that Rhode Island’s economic-development strategy should consist of broad-based tax reform. Yet Mr. Cicione curiously neglects to mention that this is exactly what Chairman Costantino and the General Assembly did with the 2006 personal-income-tax reform.
We would also point to recent writings by the American Legislative Exchange Council, which enthuses that “good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same.” Bravo! On behalf of the Chamber’s 2,600 member companies and their employees — 170,000 workers strong — we couldn’t have said it better.
Rhode Island is beginning to get on the right track with pro-growth tax policies, including the flat tax and the capital-gains tax. (And, by the way, on capital gains, why can’t Rhode Island be lower than Massachusetts? It makes a ton of sense, considering the importance of entrepreneurial start-ups to our economy.)
Now, the great work of two years ago is coming under fire. As our state grapples with the budget deficit, we agree that part of the solution is to create more and better jobs, particularly in such emerging industries as life sciences, medical devices and alternative-energy technologies.
We need more taxpayers, not more taxes.
The other thing we need to do is to quickly bring state spending in line with our means through the enactment of some fairly dramatic measures, and to couple that move with some equally dramatic economic development activity. Failing to do any of the above would plunge Rhode Island into an economic death spiral.
Let’s be clear. We share the same ultimate goals as the sponsors of a plan to dismantle the tax-reform efforts of 2006. We want a permanent solution to the state’s budget problems, and we want dependable social services for those in need. We differ in our opinion as to the best, long-term approach. We want what works, and what works is a competitive and predictable tax climate that encourages job creation and economic growth.
We are fortunate to have some very courageous leaders in the General Assembly who are inclined to take the long view, but they need to know that they have broad support.
Our message to the workers of Rhode Island is: Don’t be silent! We urge you to contact your state senator and representative and share your concerns about your job security and your ability to get ahead. Or get in touch with us directly to share your own story.
At this critical time, your legislators need to fully understand that “what happens in business” defines “what happens to you.” Tell them: Protect our jobs. Fight for our ability to compete. Stay the course on tax reform.
Ed Cooney is chairman of the board and Laurie White president of the Greater Providence Chamber of Commerce.
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