01:00 AM EDT on Thursday, August 12, 2004

Once upon a time, not so long ago, taxes in Massachusetts were more oppressive than even those in Rhode Island. In 1982, the Bay State's total state and local tax burden was 9.3 percent above the national average, earning it the moniker Taxachusetts.

Massachusetts wised up. It remains a state with a compassionate social-services system and excellent schools. But, according to a new study by the Rhode Island Public Expenditure Council (RIPEC), Massachusetts now ranks 40th in total tax burden (state and local tax collections per $1,000 of personal income). That tax bite is 7.8 percent below the national average. It seems to work: Job creators are moving in and staying -- in part because of taxes, in part because of Boston's concentration of colleges and research institutions, and in part because of a fine quality of life.

Rhode Island, apparently, never got the memo. It's going backwards.

In 1982, the Ocean State ranked 10th in tax burden, 8.1 percent above the national average. In 2002, it ranked sixth, 9.3 percent above the average. Its colossal property taxes contribute mightily to the problem.

Where is the money going? Are services in Rhode Island dramatically better than in Massachusetts? (If anything, Massachusetts services -- starting with public schools -- seem superior.)

What Rhode Island taxpayers seem to be paying dearly for are special interests who help elect the politicians, and get rewarded for it -- notably, public-employee unions, which have managed to obtain excellent (and in some cases extravagent) pay and benefits, including pension benefits that threaten to drive the state into serious economic problems.

Unfortunately, those high taxes do more than punish people who live and work in Rhode Island. They also drive away entrepreneurs and executives who create or relocate the jobs that produce tax revenues. Without jobs, Rhode Island cannot afford the public services that contribute greatly to its quality of life.

This is especially so when there are less punishing states bordering Rhode Island -- not only Massachusetts, but also Connecticut, which ranks 27th in state and local tax burden, as measured by RIPEC: slightly under the national average. And nearby New Hampshire ranks 49th in tax burden.

Rhode Island must face reality. It confronts a frightening downward spiral: higher taxes inflicted on the few who remain in Rhode Island, with educated children forced to move out to find jobs, and job creators steering clear in self-defense.

The new RIPEC study is far from the first warning Rhode Island has received. In June, the magazine Bloomberg Wealth Manager rated the Ocean State the worst in the nation -- of 50 states and the District of Columbia -- in punishing wealth. That advertises to those who might otherwise bring wealth (and jobs) to the Ocean State that they should avoid what the magazine called "tax-hell Rhode Island."

Meanwhile, the Pacific Research Institute for Public Policy rated Rhode Island fourth from the bottom in creating a climate in which free enterprise can flourish.

It is time for the Ocean State's leaders to respond to this problem by positioning the state so that it can aggressively compete with its neighbors for jobs. Those leaders must stop focusing on rewarding special interests and start worrying about the general interest -- and the taxpayers who keep the whole structure of government going.

In all likelihood, the politicians will not mend their ways until the voters drive them in that direction. The longer it takes, the worse off Rhode Island will be.