Governor Carcieri, slaving away at trying to fix the state’s budget mess, has proposed slashing the Rhode Island Historic Preservation Investment Tax Credit. Since the credit raises $5 in economic output for every dollar of state investment, cutting it would put Mr. Carcieri’s picture in the dictionary under the definition of “false economy.”

We urge that the credit be kept.

Most regrettable is the retroactivity of the governor’s proposal, which would undermine the financial viability of many projects already under construction. Such ex-post-facto action would be economically counterproductive, as well as morally dubious and possibly illegal.

Since the credit’s enactment, in 2002, 277 projects to rehabilitate old buildings have been approved, of which 150 are now complete and 127 are under way. Together, they bring the total investment in Rhode Island to $1.53 billion. The 7,200 permanent jobs created would pay wages of $321 million annually. That does not include 17,725 construction jobs and 8,436 jobs servicing construction, paying about $954 million until the projects are done.

According to consultants Lipman Frizzell & Mitchell, who have updated a 2005 report with new figures through last September, the credits sparked more investment in historic rehabilitation between 2002 and 2006 than in the prior quarter century.

Mr. Carcieri reacts, understandably, to the credits’ $460-million cost, $160 million of which the state has already covered. Since tax credits are not cashed in until projects are complete, they are an investment in “done deals,” with no risk. It would be like going to a casino with a guarantee that every coin the state popped into the slots would be returned fivefold.

It doesn’t get much better than that. But with the tax credits, it does. First off, the construction jobs start paying tax dividends to the state immediately. Income and sales taxes paid by construction workers amount to a 24 percent downpayment on the state’s investment, worth $111 million. Permanent jobs created and new residents attracted to the state bring in more revenue every year, paying back an additional 18 percent of the credits before and after the projects are done.

And then there are the cities and towns, which benefit from the increased taxable value from the run-down, underused buildings that are renovated. Turning these buildings from eyesores into productive properties adds $766 million to the local tax base, boosting the assessed value of land and raising revenue every year. The tax credits reduce the upward pressure on property taxes.

Most important, the credits help Rhode Island play to one of its greatest strengths — its aesthetic charm. This competitive advantage for the Ocean State tends to diminish with every new building that does not bolster the state’s historic character, while it grows stronger every time an old building is saved and reused. Without the credits, this would not be happening. And consider that as more old buildings are saved, fewer remain at risk: The historic tax credits sunset themselves when their job is done.

It may be difficult to place an exact value on the “charm factor,” but its impact can’t be denied and shouldn’t be underestimated. Imagine a Rhode Island with an environment as ugly as its business climate! We don’t want to imagine it either.

The governor can do the arithmetic. Ending the historic tax credits — especially by introducing highly arbitrary retroactive penalties — would cost the state money, canceling jobs and projects already under way, reversing the state’s revenue stream, deepening the recession — sending a message of untrustworthiness that could help turn the state’s business climate from ugly to toxic. That won’t close the budget gap. To do the latter, closing redundant and/or inefficient state departments and programs, finally getting a grip on runaway public-employee-benefit costs and reordering some taxes will be necessary.

Rhode Island’s best economic-development program in decades should be preserved.